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目录
美国
证券交易委员会
华盛顿特区20549
___________________________________________________________
表格 10-Q
___________________________________________________________
☒根据1934年证券交易法第13或15(d)节的季度报告
截至季度结束日期的财务报告2024年9月30日
或者
☐根据1934年证券交易法第13或15(d)节的转型报告书
过渡期从______到______
委员会文件号 001-36722
___________________________________________________________
TRIUMPH FINANCIAL，INC。
(根据其章程规定的注册人准确名称)
___________________________________________________________
得克萨斯州20-0477066
（国家或其他管辖区的
公司成立或组织）		（IRS雇主
唯一识别号码）
12700 Park Central Drive，1700号套房
达拉斯, 得克萨斯州 75251
，（主要行政办公地址）
(214) 365-6900
(注册人电话号码，包括区号)
___________________________________________________________
请以复选标记指示以下情况：（1）在过去12个月内（或注册人应当提交此类报告的更短期间内），已根据1934年证券交易法第13或15(d)条的要求提交了所有必须提交的报告；以及（2）在过去90天内一直受到此类提交要求的约束。是  x    否  o
请勾选以下内容。申报人是否已在过去12个月内（或申报人需要提交此类文件的时间较短的期间内）逐个以电子方式提交了根据规则405提交的互动数据文件。这章的交易中规定。    是  x    否  o
勾选以下选框，指示申报人是大型加速评估提交人、加速评估提交人、非加速评估提交人、小型报告公司或新兴成长型公司。关于“大型加速评估提交人”、“加速评估提交人”、“小型报告公司”和“新兴成长型公司”的定义，请参见《交易所法规》第12亿.2条。
大型加速报告人
x
加速文件申报人
☐
非加速文件提交人
☐
更小的报告公司
☐
新兴成长公司
☐
如果是新兴增长公司，请用复选标记表示，表明注册人选择不使用根据《交易所法案》第13（a）节规定的任何新的或修订的财务会计准则的延长过渡期。o
请勾选是否注册公司是外壳公司（根据《交易所法规》规定的120亿.2条）。 是☐    否  x
请注明在最新适用日期时本发行人每种普通股的流通股数。
普通股股份 — 面值$0.01， 23,387,463 股份，截至2024年10月14日。
每个交易所的名称
每一类的名称交易
符号:		在其上注册的交易所的名称
普通股，每股面值0.01美元TFIN
纳斯达克全球货币选择市场
每份存托股代表7.125%系列C固定利率不累积永续优先股中的1/40权益每股面值为$0.01
TFINP
纳斯达克全球货币选择市场

目录
TRIUMPH FINANCIAL，INC。
10-Q表格
2024年9月30日
目录
i
目录
第一部分 - 财务信息
项目1
基本报表
1
目录
TRIUMPH FINANCIAL, INC.及其子公司
基本报表
2024年9月30日和2023年12月31日
（以千美元为单位）
2020年9月30日
2024		12月31日
2023
(未经审计)
资产
现金和存放在银行的款项$78,059 $93,072 
存放在其他银行的计息存款411,221 193,563 
现金及现金等价物总额489,280 286,635 
证券 - 具有明确确定公允价值的股权投资4,583 4,488 
可供出售证券403,186 299,644 
证券-持有至到期，减免信用损失净额$3,383 和 $3,190，分别为$的公允价值2,503 和 $4,015 的坏账准备
2,121 2,977 
待售贷款26 1,236 
贷款净额，扣除2024年6月30日拨备为$41,243 和 $35,219 的坏账准备
4,291,724 4,127,881 
美国联邦住房贷款银行及其他受限制股票7,112 14,278 
资产和设备净值156,462 113,457 
资本化的软件，净额34,481 22,365 
商誉233,709 233,709 
无形资产, 净额17,316 23,646 
银行拥有的人寿保险42,381 41,946 
递延所得税资产净额10,667 8,800 
其他172,998 166,272 
总资产$5,866,046 $5,347,334 
负债和股东权益
负债
存款
不计息$2,103,092 $1,632,022 
人形机器人-轴承利息2,603,602 2,345,456 
存款总额4,706,694 3,977,478 
联邦住房贷款银行预支款项30,000 255,000 
次级债券109,072 108,678 
初级次级债券42,196 41,740 
其他负债92,320 100,038 
负债合计4,980,282 4,482,934 
承诺和不确定性-请参阅附注6和附注7
股东权益-请参阅附注10
优先股45,000 45,000 
普通股，23,387,522和页面。23,302,414分别拥有 和 股已发行股份
291 290 
股本溢价564,464 550,743 
Treasury stock, at cost(268,352)(265,038)
保留盈余546,179 536,331 
累计其他综合收益(亏损)(1,818)(2,926)
股东权益总额885,764 864,400 
负债和股东权益合计$5,866,046 $5,347,334 
请参见附注的简明合并财务报表。
2
目录
TRIUMPH FINANCIAL, INC.及其子公司
综合利润表
2024年和2023年截至9月30日的三个月和九个月
（金额以千为单位，每股金额除外）
(未经审计)
截至9月30日的三个月截至9月30日的九个月
2024202320242023
利息和股息收入：
包括费用在内的贷款$52,886 $59,669 $161,338 $169,465 
包括费用在内的已计提应收账款40,598 39,161 118,535 119,884 
证券6,500 5,205 17,374 14,552 
FHLb和其他限制性股票379 397 845 741 
现金存款7,712 3,101 18,945 9,051 
总利息收入108,075 107,533 317,037 313,693 
利息支出:
存款14,041 12,474 41,713 22,553 
次级债券1,227 1,315 3,676 3,936 
初级次级债券1,172 1,169 3,518 3,293 
其他借款2,936 1,248 5,481 7,751 
总利息支出19,376 16,206 54,388 37,533 
净利息收入88,699 91,327 262,649 276,160 
信用损失净额4,263 812 14,314 6,068 
扣除信用损失净额后的净利息收入84,436 90,515 248,335 270,092 
非利息收入：
存款服务费1,865 1,728 5,402 5,210 
Card income2,135 2,065 6,088 6,152 
证券出售或看涨的净收益（损失）— 5 — 5 
贷款出售的净收益（损失）253 203 184 206 
手续费收入9,129 8,108 26,329 21,720 
保险佣金1,472 1,074 4,545 3,970 
其他2,643 227 7,115 (1,320)
非利息收入总额17,497 13,410 49,663 35,943 
非利息支出:
薪水和员工福利55,447 50,884 165,637 159,789 
房屋、家具和設備8,701 7,542 24,902 21,537 
FDIC保险和其他监管评估679 682 1,973 1,968 
专业费用4,734 3,941 12,833 10,061 
无形资产摊销3,600 2,849 9,193 8,700 
广告和促销1,416 1,839 4,638 4,839 
通信-半导体技术12,422 10,784 38,623 34,034 
软件摊销1,484 1,024 4,015 3,054 
其他7,163 6,714 21,546 21,954 
总非利息支出95,646 86,259 283,360 265,936 
净利润税前6,287 17,666 14,638 40,099 
所得税支出940 4,872 2,386 8,645 
净利润$5,347 $12,794 $12,252 $31,454 
优先股股息(801)(801)(2,404)(2,404)
净利润可供普通股股东分配$4,546 $11,993 $9,848 $29,050 
每股普通股收益
基本$0.19 $0.52 $0.42 $1.25 
稀释的$0.19 $0.51 $0.42 $1.23 
See accompanying condensed notes to consolidated financial statements.
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Nine Months Ended September 30, 2024 and 2023
(Dollar amounts in thousands)
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Net income$5,347 $12,794 $12,252 $31,454 
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period2,073 506 1,518 2,862 
Tax effect(496)(127)(410)(568)
Unrealized holding gains (losses) arising during the period, net of taxes1,577 379 1,108 2,294 
Reclassification of amount realized through sale or call of securities— (5)— (5)
Tax effect— 1 — 1 
Reclassification of amount realized through sale or call of securities, net of taxes— (4)— (4)
Change in unrealized gains (losses) on securities, net of tax1,577 375 1,108 2,290 
Total other comprehensive income (loss)1,577 375 1,108 2,290 
Comprehensive income$6,924 $13,169 $13,360 $33,744 
See accompanying condensed notes to consolidated financial statements.
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Three and Nine Months Ended September 30, 2024 and 2023
(Dollar amounts in thousands)
(Unaudited)
Preferred StockCommon StockAdditional
Paid-in-
Capital		Treasury StockRetained
Earnings		AccumulatedTotal
Stockholders'
Equity
Liquidation
Preference
Amount		Shares
Outstanding		Par
Amount		Shares
Outstanding		CostOther
Comprehensive
Income (Loss)
Balance, January 1, 2024$45,000 23,302,414 $290 $550,743 5,683,841 $(265,038)$536,331 $(2,926)$864,400 
Vesting of restricted stock units and performance stock units— 9,877 — — — — — — — 
Stock option exercises, net— 5,401 — 144 — — — — 144 
Issuance of common stock pursuant to the Employee Stock Purchase Plan— 18,328 — 1,099 — — — — 1,099 
Stock based compensation— — — 3,627 — — — — 3,627 
Purchase of treasury stock, net— (1,023)— — 1,023 (81)— — (81)
Dividends on preferred stock— — — — — — (801)— (801)
Net income— — — — — — 4,158 — 4,158 
Other comprehensive income (loss)— — — — — — — (207)(207)
Balance, March 31, 2024$45,000 23,334,997 $290 $555,613 5,684,864 $(265,119)$539,688 $(3,133)$872,339 
Vesting of restricted stock units and performance stock units— 63,401 1 (1)— — — — — 
Stock based compensation— — — 3,439 — — — — 3,439 
Forfeiture of restricted stock awards— (278)— 21 278 (21)— — — 
Purchase of treasury stock, net— (44,601)— — 44,601 (3,212)— — (3,212)
Dividends on preferred stock— — — — — — (802)— (802)
Net income— — — — — — 2,747 — 2,747 
Other comprehensive income (loss)— — — — — — — (262)(262)
Balance, June 30, 2024$45,000 23,353,519 $291 $559,072 5,729,743 $(268,352)$541,633 $(3,395)874,249 
Vesting of restricted stock units and performance stock units— 5,332 — — — — — — — 
Stock option exercises, net— 10,350 — 281 — — — — 281 
Stock based compensation— — — 4,026 — — — — 4,026 
Issuance of common stock pursuant to the employee stock purchase plan— 18,321 — 1,085 — — — — 1,085 
Dividends declared— — — — — — (801)— (801)
Net income— — — — — — 5,347 — 5,347 
Other comprehensive income (loss)— — — — — — — 1,577 1,577 
Balance, September 30, 2024$45,000 23,387,522 $291 $564,464 5,729,743 $(268,352)$546,179 $(1,818)$885,764 
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Preferred StockCommon StockAdditional
Paid-in-
Capital		Treasury StockRetained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total
Stockholders'
Equity
Liquidation
Preference
Amount		Shares
Outstanding		Par
Amount		Shares
Outstanding		Cost
Balance, January 1, 2023$45,000 24,053,585 $283 $534,790 4,268,131 $(182,658)$498,456 $(6,900)$888,971 
Issuance of restricted stock awards— 6,852 — — — — — — — 
Vesting of restricted stock and performance stock units— 366,892 4 (4)— — — — — 
Stock option exercises, net— 758 — (33)— — — — (33)
Stock based compensation— — — 2,881 — — — — 2,881 
Forfeiture of restricted stock awards— (10,961)— 610 10,961 (610)— — — 
Issuance of common stock pursuant to the Employee Stock Purchase Plan— 21,057 — 997 — — — — 997 
Purchase of treasury stock, net— (1,067,668)— — 1,067,668 (77,185)— — (77,185)
Dividends on preferred stock— — — — — — (801)— (801)
Net income— — — — — — 11,010 — 11,010 
Other comprehensive income (loss)— — — — — — —1,376 1,376 
Balance, March 31, 2023$45,000 23,370,515 $287 $539,241 5,346,760 $(260,453)$508,665 $(5,524)$827,216 
Vesting of restricted stock and performance stock units— 233,728 2 (2)— — — — — 
Stock option exercises, net— 829 — (19)— — — — (19)
Stock based compensation— — — 3,320 — — — — 3,320 
Forfeiture of restricted stock awards— (451)— 25 451 (25)— — — 
Purchase of treasury stock, net— (334,736)— — 334,736 (4,438)— — (4,438)
Dividends on preferred stock— — — — — — (802)— (802)
Net income— — — — — — 7,650 — 7,650 
Other comprehensive income (loss)— — — — — — — 539 539 
Balance, June 30, 2023$45,000 23,269,885 $289 $542,565 5,681,947 $(264,916)$515,513 $(4,985)$833,466 
Issuance of restricted stock awards— 6,522 1 (1)— — — — — 
Stock based compensation— — — 3,714 — — — — 3,714 
Forfeiture of restricted stock awards— (1,566)— 100 1,566 (100)— — — 
Issuance of common stock pursuant to the ESPP— 16,852 — 834 — — — — 834 
Dividends declared— — — — — — (801)— (801)
Net income— — — — — — 12,794 — 12,794 
Other comprehensive income (loss)— — — — — — — 375 375 
Balance, September 30, 2023$45,000 23,291,693 $290 $547,212 5,683,513 $(265,016)$527,506 $(4,610)$850,382 
See accompanying condensed notes to consolidated financial statements.
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2024 and 2023
(Dollar amounts in thousands)
(Unaudited)
Nine Months Ended September 30,
20242023
Cash flows from operating activities:
Net income$12,252 $31,454 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation11,545 10,212 
Net accretion on loans(2,491)(4,203)
Amortization of subordinated notes issuance costs394 654 
Amortization of junior subordinated debentures456 434 
Net (accretion) amortization on securities(665)(665)
Amortization of intangible assets9,193 8,700 
Software amortization4,015 3,054 
Deferred taxes, net(2,279)6,313 
Credit loss expense (benefit)14,314 6,068 
Stock based compensation11,092 9,915 
Net (gains) losses on sale or call of debt securities— (5)
Net (gains) losses on equity securities(629)119 
Net OREO (gains) losses and valuation adjustments16 — 
Origination of loans held for sale(5,844)(3,584)
Proceeds from sale of loans originated or purchased for sale5,253 3,435 
Net (gains) losses on sale of loans(184)(206)
Net change in operating leases211 (199)
(Increase) decrease in other assets(23,768)(42,870)
Increase (decrease) in other liabilities(11,289)(10,672)
Net cash provided by (used in) operating activities21,592 17,954 
Cash flows from investing activities:
Proceeds from sales of equity securities— 783 
Purchases of securities available for sale(165,451)(69,483)
Proceeds from sales of securities available for sale— 14,005 
Proceeds from maturities, calls, and pay downs of securities available for sale68,959 21,054 
Proceeds from maturities, calls, and pay downs of securities held to maturity796 451 
Purchases of loans held for investment(7,839)(18,842)
Proceeds from sale of loans24,578 45,940 
Net change in loans(190,878)(288,762)
Purchases of premises and equipment, net(54,550)(19,935)
Net proceeds from sale of OREO64 — 
(Purchases) redemptions of FHLB and other restricted stock, net7,166 (3,849)
Acquired intangible assets(2,920)(3,042)
Net cash provided by (used in) investing activities(320,075)(321,680)
Cash flows from financing activities:
Net increase (decrease) in deposits729,216 315,715 
Increase (decrease) in customer repurchase agreements— (340)
Increase (decrease) in Federal Home Loan Bank advances(225,000)— 
Preferred stock dividends(2,404)(2,404)
Stock option exercises, net425 (52)
Proceeds from employee stock purchase plan common stock issuance2,184 1,831 
Purchase of treasury stock, net(3,293)(81,623)
Net cash provided by (used in) financing activities501,128 233,127 
Net increase (decrease) in cash and cash equivalents202,645 (70,599)
Cash and cash equivalents at beginning of period286,635 408,182 
Cash and cash equivalents at end of period489,280 337,583 
See accompanying condensed notes to consolidated financial statements.
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2024 and 2023
(Dollar amounts in thousands)
(Unaudited)
Nine Months Ended September 30,
20242023
Supplemental cash flow information:
Interest paid$53,026 $30,893 
Income taxes paid, net$813 $14,019 
Cash paid for operating lease liabilities$3,881 $4,149 
Supplemental noncash disclosures:
Loans transferred to OREO$621 $— 
Loans held for investment transferred to loans held for sale$22,787 $46,625 
Lease liabilities arising from obtaining right-of-use assets$2,482 $3,228 
Securities available for sale purchased, not settled$5,000 $— 
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Triumph Financial, Inc. (collectively with its subsidiaries, “Triumph Financial”, or the “Company” as applicable) is a financial holding company headquartered in Dallas, Texas, offering a diversified line of payments, factoring and banking services. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Triumph CRA Holdings, LLC (“TCRA”), TBK Bank, SSB (“TBK Bank”), TBK Bank’s wholly owned factoring subsidiary Triumph Financial Services LLC ("Triumph Financial Services"), and TBK Bank’s wholly owned subsidiary Triumph Insurance Group, Inc. (“TIG”). TriumphPay operates as a division of TBK Bank, SSB.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and in accordance with guidance provided by the Securities and Exchange Commission (“SEC”). Accordingly, the condensed financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary for a fair presentation. Transactions between the subsidiaries have been eliminated. Certain prior period amounts have been reclassified to conform to the current period presentation. These condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.
Reportable Segments
The Company’s reportable segments are comprised of strategic business units primarily based upon industry categories and, to a lesser extent, the core competencies relating to product origination, distribution methods, operations and servicing. Segment determination also considers organizational structure and is consistent with the presentation of financial information to the chief operating decision maker to evaluate segment performance, develop strategy, and allocate resources. The Company's chief operating decision maker is the Chief Executive Officer of Triumph Financial, Inc. Management has determined that the Company has three reportable segments consisting of Banking, Factoring, and Payments.
The Banking segment includes the operations of TBK Bank. The Banking segment derives its revenue principally from investments in interest-earning assets as well as noninterest income typical for the banking industry.
The Factoring segment includes the operations of Triumph Financial Services with revenue derived from factoring services.
The Payments segment includes the operations of the TBK Bank's TriumphPay division, which is the payments network for presentment, audit, and payment of over-the-road trucking invoices. The Payments segment derives its revenue from transaction fees and interest income on factored receivables related to invoice payments. These factored receivables consist of (i) invoices where we offer a carrier a quickpay opportunity to receive payment at a discount in advance of the standard payment term for such invoice in exchange for the assignment of such invoice to us, (ii) offering freight brokers the ability to settle their invoices with us on an extended term following our payment to their carriers as an additional liquidity option for such freight brokers, and (iii) factoring transactions where we purchase receivables payable to such freight brokers from their shipper clients.
For further discussion of management's operating segments and allocation methodology, see Note 15 – Business Segment Information.
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Adoption of New Accounting Standards
In March 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-02, "Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures" ("ASU 2022-02"). ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings ("TDRs") in ASC 310-40, "Receivables - Troubled Debt Restructurings by Creditors" for entities that have adopted the current expected credit loss ("CECL") model introduced by ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (ASU 2016-13"). ASU 2022-02 also requires that public business entities disclose current-period gross charge-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, "Financial Instruments—Credit Losses—Measured at Amortized Cost".
The Company adopted ASU 2022-02 effective January 1, 2023 on a prospective basis. Adoption of ASU 2022-02 did not have a material impact on the Company's consolidated financial statements.
Newly Issued, But Not Yet Effective Accounting Standards
In December 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07, "Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures" ("ASU 2023-07"). ASU 2023-07 Requires public entities to disclose significant segment expenses, an amount and description for other segment items, the title and position of the entity’s chief operating decision maker ("CODM") and an explanation of how the CODM uses the reported measures of profit or loss to assess segment performance, and, on an interim basis, certain segment related disclosures that previously were required only on an annual basis. ASU 2023-07 also clarifies that entities with a single reportable segment are subject to both new and existing segment reporting requirements and that an entity is permitted to disclose multiple measures of segment profit or loss, provided that certain criteria are met. ASU 2023-07 is effective for the Company for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company will update its segment related disclosures upon adoption.
In December 2023, the FASB issued Accounting Standards Update 2023-09, “Income Taxes (Topic 740), Improvements to Income Tax Disclosures" ("ASU 2023-09"). ASU 2023-09 requires public entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. ASU 2023-09 is effective for the Company for fiscal years beginning after December 15, 2024 with early adoption permitted. The Company will update its income tax disclosures upon adoption.
NOTE 2 — SECURITIES
Equity Securities With Readily Determinable Fair Values
The Company held equity securities with readily determinable fair values of $4,583,000 and $4,488,000 at September 30, 2024 and December 31, 2023, respectively. The gross realized and unrealized gains and losses recognized on equity securities with readily determinable fair values in noninterest income in the Company’s consolidated statements of income were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Unrealized gains (losses) on equity securities held at the reporting date$161 $(137)$95 $(137)
Realized gains (losses) on equity securities sold during the period— — — 18 
$161 $(137)$95 $(119)
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Equity Securities Without Readily Determinable Fair Values
The following table summarizes the Company's investments in equity securities without readily determinable fair values:
(Dollars in thousands)September 30, 2024December 31, 2023
Equity Securities without readily determinable fair value, at cost
$61,602 $65,814 
Upward adjustments based on observable price changes, cumulative
10,163 10,163 
Equity Securities without readily determinable fair value, carrying value$71,765 $75,977 
Equity securities without readily determinable fair values include Federal Home Loan Bank and other restricted stock, which are reported separately in the Company's consolidated balance sheets. Equity securities without readily determinable fair values also include the Company's investments in the common stock of Trax Group, Inc. and Warehouse Solutions Inc., with carrying amounts of $9,700,000 and $38,088,000, respectively, at September 30, 2024. Both investments have been allocated to our Payments segment and are included in other assets in the Company's consolidated balance sheets.
The gross realized and unrealized gains (losses) recognized on equity securities without readily determinable fair values in noninterest income in the Company’s consolidated statements of income were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Unrealized gains (losses) on equity securities still held at the reporting date$— $— $— $— 
Realized gains (losses) on equity securities sold during the period— — 534 — 
$— $— $534 $— 
Management monitors its equity securities without readily determinable fair values for observable transactions in similar equity instruments as well as indicators of impairment either of which would require it to mark such equity securities to fair value. No such transactions or indicators of impairment were detected during the three and nine months ended September 30, 2024.
Debt Securities
Debt securities have been classified in the financial statements as available for sale or held to maturity. The following table summarizes the amortized cost, fair value, and allowance for credit losses of debt securities and the corresponding amounts of gross unrealized gains and losses of available for sale securities recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses of held to maturity securities:
(Dollars in thousands)Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Allowance
for Credit
Losses		Fair
Value
September 30, 2024
Available for sale securities:
Mortgage-backed securities, residential$78,585 $364 $(3,800)$— $75,149 
Asset-backed securities926 — (2)— 924 
State and municipal3,487 1 (45)— 3,443 
CLO securities320,948 1,209 (69)— 322,088 
Corporate bonds267 8 — — 275 
SBA pooled securities1,364 6 (63)— 1,307 
Total available for sale securities$405,577 $1,588 $(3,979)$— $403,186 
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrecognized
Losses		Fair
Value
September 30, 2024
Held to maturity securities:
CLO securities$5,504 $— $(3,001)$2,503 
Allowance for credit losses(3,383)
Total held to maturity securities, net of ACL$2,121 
(Dollars in thousands)Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Allowance for Credit LossesFair
Value
December 31, 2023
Available for sale securities:
Mortgage-backed securities, residential$60,411 $221 $(4,793)$— $55,839 
Asset-backed securities1,188 — (18)— 1,170 
State and municipal4,560 1 (46)— 4,515 
CLO Securities235,484 1,137 (330)— 236,291 
Corporate bonds268 7 — — 275 
SBA pooled securities1,642 3 (91)— 1,554 
Total available for sale securities$303,553 $1,369 $(5,278)$— $299,644 
(Dollars in thousands)Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrecognized
Losses		Fair
Value
December 31, 2023
Held to maturity securities:
CLO securities$6,167 $30 $(2,182)$4,015 
Allowance for credit losses(3,190)
Total held to maturity securities, net of ACL$2,977 
The amortized cost and estimated fair value of securities at September 30, 2024, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Available for Sale SecuritiesHeld to Maturity Securities
(Dollars in thousands)Amortized
Cost		Fair
Value		Amortized
Cost		Fair
Value
Due in one year or less$572 $573 $— $— 
Due from one year to five years2,152 2,130 5,504 2,503 
Due from five years to ten years49,051 49,164 — — 
Due after ten years272,927 273,939 — — 
324,702 325,806 5,504 2,503 
Mortgage-backed securities, residential78,585 75,149 — — 
Asset-backed securities926 924 — — 
SBA pooled securities1,364 1,307 — — 
$405,577 $403,186 $5,504 $2,503 
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Proceeds from sales of debt securities and the associated gross gains and losses as well as net gains and losses from calls of debt securities are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Proceeds$— $10,005 $— $14,005 
Gross gains— 5 — 5 
Gross losses— — — — 
Net gains and losses from calls of securities— — — — 
Debt securities with a carrying amount of approximately $24,681,000 and $42,445,000 at September 30, 2024 and December 31, 2023, respectively, were pledged to secure public deposits, customer repurchase agreements, and for other purposes required or permitted by law.
Accrued interest on available for sale securities totaled $5,515,000 and $3,789,000 at September 30, 2024 and December 31, 2023, respectively, and was included in other assets on the Company's consolidated balance sheets. There was no accrued interest related to debt securities reversed against interest income for the three and nine months ended September 30, 2024 and 2023.
The following table summarizes available for sale debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous loss position:
Less than 12 Months12 Months or MoreTotal
(Dollars in thousands)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
September 30, 2024
Available for sale securities:
Mortgage-backed securities, residential$11,293 $(74)$27,469 $(3,726)$38,762 $(3,800)
Asset-backed securities— — 924 (2)924 (2)
State and municipal513 — 2,031 (45)2,544 (45)
CLO securities46,494 (69)— — 46,494 (69)
Corporate bonds— — — — — — 
SBA pooled securities— — 991 (63)991 (63)
$58,300 $(143)$31,415 $(3,836)$89,715 $(3,979)
Less than 12 Months12 Months or MoreTotal
(Dollars in thousands)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
December 31, 2023
Available for sale securities:
Mortgage-backed securities, residential$13,157 $(312)$32,885 $(4,481)$46,042 $(4,793)
Asset-backed securities1,170 (18)— — 1,170 (18)
State and municipal975 (13)2,424 (33)3,399 (46)
CLO Securities2,576 (13)42,735 (317)45,311 (330)
Corporate bonds— — — — — — 
SBA pooled securities216 (9)1,059 (82)1,275 (91)
$18,094 $(365)$79,103 $(4,913)$97,197 $(5,278)
Management evaluates available for sale debt securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to (1) the extent to which the fair value is less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
At September 30, 2024, the Company had 84 available for sale debt securities in an unrealized loss position without an allowance for credit losses. Management does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. Accordingly, as of September 30, 2024, management believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in interest rates and other market conditions, and therefore the Company carried no allowance for credit losses on available for sale debt securities at September 30, 2024.
The following table presents the activity in the allowance for credit losses for held to maturity debt securities:
(Dollars in thousands)Three Months Ended September 30,Nine Months Ended September 30,
Held to Maturity CLO Securities2024202320242023
Allowance for credit losses:
Beginning balance$3,162 $2,876 $3,190 $2,444 
Credit loss expense221 14 193 446 
Allowance for credit losses ending balance$3,383 $2,890 $3,383 $2,890 
The Company’s held to maturity securities are investments in the unrated subordinated notes of collateralized loan obligation funds. These securities are the junior-most in securitization capital structures, and are subject to suspension of distributions if the credit of the underlying loan portfolios deteriorates materially. The ACL on held to maturity securities is estimated at each measurement date on a collective basis by major security type. At September 30, 2024 and December 31, 2023, the Company’s held to maturity securities consisted of three investments in the subordinated notes of collateralized loan obligation (“CLO”) funds. Expected credit losses for these securities are estimated using a discounted cash flow methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Ultimately, the realized cash flows on CLO securities such as these will be driven by a variety of factors, including credit performance of the underlying loan portfolio, adjustments to the portfolio by the asset manager, and the timing of a potential call. At September 30, 2024, $4,187,000 of the Company’s held to maturity securities were classified as nonaccrual.
NOTE 3 — LOANS AND ALLOWANCE FOR CREDIT LOSSES
Loans Held for Sale
The following table presents loans held for sale:
(Dollars in thousands)September 30, 2024December 31, 2023
1-4 family residential$996 $1,230 
Commercial(970)6 
Total loans held for sale$26 $1,236 
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Loans Held for Investment
Loans
The following table presents the amortized cost and unpaid principal balance of loans held for investment:
September 30, 2024December 31, 2023
(Dollars in thousands)Amortized
Cost		Unpaid
Principal		DifferenceAmortized
Cost		Unpaid
Principal		Difference
Commercial real estate$762,343 $762,639 $(296)$812,704 $813,623 $(919)
Construction, land development, land217,148 217,729 (581)136,720 137,209 (489)
1-4 family residential126,103 126,284 (181)125,916 126,096 (180)
Farmland57,621 57,708 (87)63,568 63,728 (160)
Commercial1,093,477 1,095,179 (1,702)1,170,365 1,176,243 (5,878)
Factored receivables1,201,495 1,205,881 (4,386)1,116,654 1,119,544 (2,890)
Consumer6,990 6,992 (2)8,326 8,328 (2)
Mortgage warehouse867,790 867,790 — 728,847 728,847 — 
Total loans held for investment4,332,967 $4,340,202 $(7,235)4,163,100 $4,173,618 $(10,518)
Allowance for credit losses(41,243)(35,219)
$4,291,724 $4,127,881 
The difference between the amortized cost and the unpaid principal is due to (1) premiums and discounts associated with acquired loans totaling $3,404,000 and $6,861,000 at September 30, 2024 and December 31, 2023, respectively, and (2) net deferred origination and factoring fees totaling $3,831,000 and $3,657,000 at September 30, 2024 and December 31, 2023, respectively.
Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $35,076,000 and $30,686,000 at September 30, 2024 and December 31, 2023, respectively, and was included in other assets on the Company's consolidated balance sheets.
At September 30, 2024 and December 31, 2023, the Company had $226,986,000 and $253,492,000, respectively, of customer reserves associated with factored receivables. These amounts represent customer reserves held to settle any payment disputes or collection shortfalls, may be used to pay customers’ obligations to various third parties as directed by the customer, are periodically released to or withdrawn by customers, and are reported as deposits in the consolidated balance sheets.
At September 30, 2024 and December 31, 2023 the balance of the Over-Formula Advance Portfolio, acquired from Transport Financial Solutions during 2020, included in factored receivables was $1,860,000 and $3,151,000, respectively. These balances were fully reserved as of those respective dates.
At September 30, 2024 the Company carried a separate receivable (the "Misdirected Payments") payable by the United States Postal Service (“USPS”) arising from accounts factored to the largest Over-Formula Advance Portfolio carrier. The balance of such Misdirected Payments, net of customer reserves, was $19,361,000 at September 30, 2024. This amount is separate from the acquired Over-Formula Advances. The amounts represented by this receivable were paid by the USPS directly to such customer in contravention of notices of assignment delivered to, and previously honored by, the USPS, which amount was then not remitted back to us by such customer as required. The USPS disputes their obligation to make such payment, citing purported deficiencies in the notices delivered to them. We are a party to litigation in the United States Court of Federal Claims against the USPS seeking a ruling that the USPS was obligated to make the payments represented by this receivable directly to us. Based on our legal analysis and discussions with our counsel advising us on this matter, we continue to believe it is probable that we will prevail in such action and that the USPS will have the capacity to make payment on such receivable. Consequently, we have not reserved for such balance as of September 30, 2024.
Loans with carrying amounts of $1,435,460,000 and $1,588,532,000 at September 30, 2024 and December 31, 2023, respectively, were pledged to secure Federal Home Loan Bank borrowing capacity and Federal Reserve Bank discount window borrowing capacity.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Allowance for Credit Losses
The Company’s estimate of the ACL reflects losses expected over the remaining contractual life of the assets. The contractual term does not consider extensions, renewals or modifications. The activity in the allowance for credit losses (“ACL”) related to loans held for investment is as follows:
(Dollars in thousands)Beginning
Balance		Credit Loss
Expense		Charge-offsRecoveriesEnding
Balance
Three months ended September 30, 2024
Commercial real estate$5,438 $(206)$(831)$— $4,401 
Construction, land development, land2,596 333 — — 2,929 
1-4 family residential972 15 (18)1 970 
Farmland395 (1)— — 394 
Commercial17,372 4,489 (1,913)18 19,966 
Factored receivables11,928 323 (951)270 11,570 
Consumer156 88 (114)16 146 
Mortgage warehouse734 133 — — 867 
$39,591 $5,174 $(3,827)$305 $41,243 
(Dollars in thousands)Beginning
Balance		Credit Loss
Expense		Charge-offsRecoveriesEnding
Balance
Three months ended September 30, 2023
Commercial real estate$4,783 $1,008 $(16)$— $5,775 
Construction, land development, land1,235 (5)— 2 1,232 
1-4 family residential1,046 (8)— 1 1,039 
Farmland476 (42)— — 434 
Commercial12,977 (44)(213)69 12,789 
Factored receivables13,441 389 (1,453)247 12,624 
Consumer166 (157)(143)300 166 
Mortgage warehouse846 (90)— — 756 
$34,970 $1,051 $(1,825)$619 $34,815 
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)Beginning
Balance		Credit Loss
Expense		Charge-offsRecoveriesEnding
Balance
Nine Months Ended September 30, 2024
Commercial real estate$6,030 $(798)$(831)$— $4,401 
Construction, land development, land965 1,963 — 1 2,929 
1-4 family residential927 71 (32)4 970 
Farmland442 (48)— — 394 
Commercial14,060 9,558 (3,734)82 19,966 
Factored receivables11,896 3,045 (4,283)912 11,570 
Consumer171 221 (308)62 146 
Mortgage warehouse728 139 — — 867 
$35,219 $14,151 $(9,188)$1,061 $41,243 
(Dollars in thousands)Beginning
Balance		Credit Loss
Expense		Charge-offsRecoveriesEnding
Balance
Nine months ended September 30, 2023
Commercial real estate$4,459 $1,262 $(16)$70 $5,775 
Construction, land development, land1,155 73 — 4 1,232 
1-4 family residential838 195 (5)11 1,039 
Farmland483 (49)— — 434 
Commercial15,918 2,271 (5,559)159 12,789 
Factored receivables19,121 2,460 (9,566)609 12,624 
Consumer175 (92)(414)497 166 
Mortgage warehouse658 98 — — 756 
$42,807 $6,218 $(15,560)$1,350 $34,815 
The increase in required ACL during the three months ended September 30, 2024 is a function of net charge-offs of $3,522,000 and credit loss expense of $5,174,000.
The increase in required ACL during the nine months ended September 30, 2024 is a function of net charge-offs of $8,127,000 and credit loss expense of $14,151,000.
The Company uses the discounted cash flow (DCF) method to estimate ACL for the commercial real estate, construction, land development, land, 1-4 family residential, commercial (excluding liquid credit and PPP), and consumer loan pools. For all loan pools utilizing the DCF method, the Company utilizes and forecasts national unemployment as a loss driver. The Company also utilizes and forecasts either one-year percentage change in national retail sales (commercial real estate – non multifamily, commercial general, commercial agriculture, commercial asset-based lending, commercial equipment finance, consumer), one-year percentage change in the national home price index (1-4 family residential and construction, land development, land), or one-year percentage change in national gross domestic product (commercial real estate – multifamily) as a second loss driver depending on the nature of the underlying loan pool and how well that loss driver correlates to expected future losses. Consistent forecasts of the loss drivers are used across the loan segments. The Company also forecasts prepayments speeds for use in the DCF models with higher prepayment speeds resulting in lower required ACL levels and vice versa for shorter prepayment speeds. These assumed prepayment speeds are based upon our historical prepayment speeds by loan type adjusted for the expected impact of the future interest rate environment. The impact of these assumed prepayment speeds is lesser in magnitude than the aforementioned loss driver assumptions.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For all DCF models at September 30, 2024, the Company has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over eight quarters on a straight-line basis. The Company leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of economic forecasts are also considered by the Company when developing the forecast metrics. At September 30, 2024 as compared to December 31, 2023, the Company forecasted minimal change in national unemployment and one-year percentage change in national gross domestic product while forecasting improvement in one-year percentage change in the national home price index and some degradation in on-year percentage change in national retail sales. At September 30, 2024 for national unemployment, the Company projected a low percentage in the first quarter followed by a gradual rise in the following three quarters. For percentage change in national retail sales, the Company projected a small increase in the first projected quarter followed by a decline to negative levels over the last three projected quarters to a level below recent actual periods. For percentage change in national home price index, the Company projected an increase in the first projected quarter followed by a steep drop to negative levels for the remaining three quarters with such negative levels peaking in the fourth projected quarter. For percentage change in national gross domestic product, management projected low-to-near-zero growth for each projected quarter with the exception of positive growth in the first projected quarter. At September 30, 2024, the Company used its historical prepayment speeds with minimal adjustment.
The Company uses a loss-rate method to estimate expected credit losses for the farmland, liquid credit, factored receivable, and mortgage warehouse loan pools. For each of these loan segments, the Company applies an expected loss ratio based on internal and peer historical losses adjusted as appropriate for qualitative factors. Qualitative loss factors are based on the Company's judgment of company, market, industry or business specific data, changes in underlying loan composition of specific portfolios, trends relating to credit quality, delinquency, non-performing and adversely rated loans, and reasonable and supportable forecasts of economic conditions. Loss factors used to calculate the required ACL on pools that use the loss-rate method reflect the forecasted economic conditions described above.
For the three months ended September 30, 2024, changes in projected loss drivers and prepayment assumptions over the reasonable and supportable forecast period increased the required ACL by $531,000. Changes in loan volume and mix decreased the required ACL by $1,068,000. Changes in required specific reserves increased the ACL by $2,189,000. Net charge-offs during the period were $3,522,000.
For the three months ended September 30, 2023, changes in projected loss drivers and prepayment assumptions over the reasonable and supportable forecast period increased the required ACL by $164,000. Changes in loan volume and mix increased the required ACL by $395,000. Decreases in required specific reserves decreased the required ACL by $714,000. Net charge-offs during the period were $1,206,000.
For the nine months ended September 30, 2024, changes in projected loss drivers and prepayment assumptions over the reasonable and supportable forecast period increased the required ACL by $2,539,000. Changes in loan volume and mix had an insignificant impact on the ACL. Increases in required specific reserves increased the required ACL by $3,543,000. Net charge-offs during the period were $8,127,000.
For the nine months ended September 30, 2023, changes in projected loss drivers and prepayment assumptions over the reasonable and supportable forecast period increased the required ACL by $561,000. Changes in loan volume and mix increased the required ACL by $179,000. Decreases in required specific reserves decreased the required ACL by $8,732,000. Net charge-offs during the period were $14,210,000.
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans:
(Dollars in thousands)Real EstateAccounts
Receivable		EquipmentOtherTotalACL
Allocation
September 30, 2024
Commercial real estate$7,110 $— $— $4,303 $11,413 $28 
Construction, land development, land— — — — — — 
1-4 family residential959 — — — 959 66 
Farmland1,976 — 77 53 2,106 — 
Commercial2,196 — 53,174 21,277 76,647 8,451 
Factored receivables— 37,748 — — 37,748 5,928 
Consumer— — — 132 132 — 
Mortgage warehouse— — — — — — 
Total$12,241 $37,748 $53,251 $25,765 $129,005 $14,473 
Commercial loans secured by Other collateral primarily consist of large liquid credit loans secured by the underlying enterprise values of the borrowers.
At September 30, 2024 the balance of the Over-Formula Advance Portfolio included in factored receivables was $1,860,000 and was fully reserved. At September 30, 2024 the balance of factoring Misdirected Payments, net of customer reserves, was $19,361,000 and carried no ACL allocation.
(Dollars in thousands)Real EstateAccounts
Receivable		EquipmentOtherTotalACL
Allocation
December 31, 2023
Commercial real estate$2,518 $— $— $— $2,518 $777 
Construction, land development, land— — — — — — 
1-4 family residential1,156 — — 22 1,178 113 
Farmland291 — — 677 968 — 
Commercial920 — 18,259 21,772 40,951 3,322 
Factored receivables— 39,577 — — 39,577 6,717 
Consumer— — — 133 133 — 
Mortgage warehouse— — — — — — 
Total$4,885 $39,577 $18,259 $22,604 $85,325 $10,929 
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
At December 31, 2023 the balance of the Over-Formula Advance Portfolio included in factored receivables was $3,151,000 and carried an ACL allocation of $3,151,000. At December 31, 2023 the balance of factoring Misdirected Payments, net of customer reserves, was $19,361,000 and carried no ACL allocation.
Past Due and Nonaccrual Loans
The following tables present an aging of contractually past due loans:
(Dollars in thousands)Past Due
30-59 Days		Past Due
60-90 Days		Past Due 90
Days or More		Total
Past Due		CurrentTotalPast Due 90
Days or More
and Accruing
September 30, 2024
Commercial real estate$5,163 $— $7,672 $12,835 $749,508 $762,343 $— 
Construction, land development, land— — — — 217,148 217,148 — 
1-4 family residential2,054 577 404 3,035 123,068 126,103 — 
Farmland— — 148 148 57,473 57,621 — 
Commercial20,828 11,651 17,715 50,194 1,043,283 1,093,477 — 
Factored receivables18,599 4,275 24,595 47,469 1,154,026 1,201,495 24,595 
Consumer9 15 — 24 6,966 6,990 — 
Mortgage warehouse— — — — 867,790 867,790 — 
Total$46,653 $16,518 $50,534 $113,705 $4,219,262 $4,332,967 $24,595 
(Dollars in thousands)Past Due
30-59 Days		Past Due
60-90 Days		Past Due 90
Days or More		Total
Past Due		CurrentTotalPast Due 90
Days or More
and Accruing
December 31, 2023
Commercial real estate$— $74 $1,369 $1,443 $811,261 $812,704 $— 
Construction, land development, land— — — — 136,720 136,720 — 
1-4 family residential680 639 309 1,628 124,288 125,916 — 
Farmland173 — — 173 63,395 63,568 — 
Commercial4,585 4,699 5,423 14,707 1,155,658 1,170,365 — 
Factored receivables32,177 6,438 26,332 64,947 1,051,707 1,116,654 26,332 
Consumer44 96 31 171 8,155 8,326 — 
Mortgage warehouse— — — — 728,847 728,847 — 
Total$37,659 $11,946 $33,464 $83,069 $4,080,031 $4,163,100 $26,332 
At September 30, 2024 and December 31, 2023, total past due Over-Formula Advances recorded in factored receivables was $1,860,000 and $3,151,000, respectively, all of which was considered past due 90 days or more. At September 30, 2024 and December 31, 2023, the entire balance of Misdirected Payments was considered past due 90 days or more. The balance of such Misdirected Payments, net of customer reserves, totaled $19,361,000 at September 30, 2024 and December 31, 2023. Given the nature of factored receivables, these assets are disclosed as past due 90 days or more still accruing; however, the Company is not recognizing income on the assets. Historically, any income recognized on factored receivables that are past due 90 days or more has not been material.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the amortized cost basis of loans on nonaccrual status and the amortized cost basis of loans on nonaccrual status for which there was no related allowance for credit losses:
September 30, 2024December 31, 2023
(Dollars in thousands)Total NonaccrualNonaccrual
With No ACL		Total NonaccrualNonaccrual
With No ACL
Commercial real estate$11,413 $10,602 $2,447 $190 
Construction, land development, land— — — — 
1-4 family residential959 872 1,178 1,028 
Farmland2,106 2,106 968 968 
Commercial74,190 55,533 40,951 33,188 
Factored receivables2,150 — — — 
Consumer132 132 133 133 
Mortgage warehouse— — — — 
$90,950 $69,245 $45,677 $35,507 
The following table presents accrued interest on nonaccrual loans reversed through interest income:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Commercial real estate$— $1 $— $17 
Construction, land development, land— — 2 — 
1-4 family residential4 2 5 8 
Farmland— 35 13 57 
Commercial6 47 194 55 
Factored receivables— — — — 
Consumer— 1 — 2 
Mortgage warehouse— — — — 
$10 $86 $214 $139 
There was no interest earned on nonaccrual loans during the three and nine months ended September 30, 2024 and 2023.
The following table presents information regarding nonperforming loans:
(Dollars in thousands)September 30, 2024December 31, 2023
Nonaccrual loans$90,950 $45,677 
Factored receivables greater than 90 days past due22,735 23,181 
$113,685 $68,858 
Credit Quality Information
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including: current collateral and financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk on a regular basis. Large groups of smaller balance homogeneous loans, such as consumer loans, are analyzed primarily based on payment status. The Company uses the following definitions for risk ratings:
Pass – Pass rated loans have low to average risk and are not otherwise classified.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Classified – Classified loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Certain classified loans have the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.
Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal of loan constitutes a current period origination. As of September 30, 2024 and December 31, 2023, based on the most recent analysis performed, the risk category of loans is as follows:
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Revolving
Loans		Revolving
Loans
Converted
To Term
Loans		Total
(Dollars in thousands)Year of Origination
September 30, 202420242023202220212020Prior
Commercial real estate
Pass$143,030 $86,878 $76,786 $93,141 $101,123 $34,311 $86,718 $133 $622,120 
Classified4,352 117,331 — 811 667 17,062 — — 140,223 
Total commercial real estate$147,382 $204,209 $76,786 $93,952 $101,790 $51,373 $86,718 $133 $762,343 
YTD gross charge-offs$— $— $352 $425 $54 $— $— $— $831 
Construction, land development, land
Pass$148,068 $60,003 $860 $969 $266 $2,577 $4,405 $— $217,148 
Classified— — — — — — — — — 
Total construction, land development, land$148,068 $60,003 $860 $969 $266 $2,577 $4,405 $— $217,148 
YTD gross charge-offs$— $— $— $— $— $— $— $— $— 
1-4 family residential
Pass$15,611 $20,237 $13,881 $17,425 $6,405 $19,487 $31,205 $314 $124,565 
Classified— 629 103 85 — 420 301 — 1,538 
Total 1-4 family residential$15,611 $20,866 $13,984 $17,510 $6,405 $19,907 $31,506 $314 $126,103 
YTD gross charge-offs$— $— $— $— $— $32 $— $— $32 
Farmland
Pass$13,584 $6,318 $8,782 $4,525 $7,226 $13,348 $1,644 $77 $55,504 
Classified— 53 1,605 — 12 447 — — 2,117 
Total farmland$13,584 $6,371 $10,387 $4,525 $7,238 $13,795 $1,644 $77 $57,621 
YTD gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial
Pass$254,630 $146,165 $112,343 $33,008 $14,486 $9,777 $418,473 $309 $989,191 
Classified5,692 47,635 23,338 6,532 6,613 19 14,457 — 104,286 
Total commercial$260,322 $193,800 $135,681 $39,540 $21,099 $9,796 $432,930 $309 $1,093,477 
YTD gross charge-offs$583 $1,368 $639 $341 $650 $153 $— $— $3,734 
Factored receivables
Pass$1,160,619 $— $— $— $1,860 $— $— $— $1,162,479 
Classified19,655 — — — 19,361 — — — 39,016 
Total factored receivables$1,180,274 $— $— $— $21,221 $— $— $— $1,201,495 
YTD gross charge-offs$2,725 $1,558 $— $— $— $— $— $— $4,283 
Consumer
Pass$2,617 $2,034 $768 $361 $222 $843 $13 $— $6,858 
Classified— — — 67 — 47 18 — 132 
Total consumer$2,617 $2,034 $768 $428 $222 $890 $31 $— $6,990 
YTD gross charge-offs$— $289 $18 $— $— $1 $— $— $308 
Mortgage warehouse
Pass$867,790 $— $— $— $— $— $— $— $867,790 
Classified— — — — — — — — — 
Total mortgage warehouse$867,790 $— $— $— $— $— $— $— $867,790 
YTD gross charge-offs$— $— $— $— $— $— $— $— $— 
Total loans
Pass$2,605,949 $321,635 $213,420 $149,429 $131,588 $80,343 $542,458 $833 $4,045,655 
Classified29,699 165,648 25,046 7,495 26,653 17,995 14,776 — 287,312 
Total loans$2,635,648 $487,283 $238,466 $156,924 $158,241 $98,338 $557,234 $833 $4,332,967 
YTD gross charge-offs$3,308 $3,215 $1,009 $766 $704 $186 $— $— $9,188 
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Revolving
Loans		Revolving
Loans
Converted
To Term
Loans		Total
(Dollars in thousands)Year of Origination
December 31, 202320232022202120202019Prior
Commercial real estate
Pass$244,388 $119,169 $98,484 $116,078 $16,351 $34,724 $88,547 $159 $717,900 
Classified91,456 665 1,630 1,016 37 — — — 94,804 
Total commercial real estate$335,844 $119,834 $100,114 $117,094 $16,388 $34,724 $88,547 $159 $812,704 
YTD gross charge-offs$108 $— $— $— $— $— $— $— $108 
Construction, land development, land
Pass$91,557 $34,683 $1,668 $2,996 $2,928 $276 $2,612 $— $136,720 
Classified— — — — — — — — — 
Total construction, land development, land$91,557 $34,683 $1,668 $2,996 $2,928 $276 $2,612 $— $136,720 
YTD gross charge-offs$— $— $— $— $— $— $— $— $— 
1-4 family residential
Pass$22,637 $16,336 $19,542 $7,229 $2,462 $20,950 $35,373 $174 $124,703 
Classified296 1 99 — 40 590 187 — 1,213 
Total 1-4 family residential$22,933 $16,337 $19,641 $7,229 $2,502 $21,540 $35,560 $174 $125,916 
YTD gross charge-offs$5 $— $— $— $— $— $— $— $5 
Farmland
Pass$13,140 $13,628 $5,586 $7,876 $2,296 $18,542 $1,359 $155 $62,582 
Classified677 — — 18 86 205 — — 986 
Total farmland$13,817 $13,628 $5,586 $7,894 $2,382 $18,747 $1,359 $155 $63,568 
YTD gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial
Pass$269,496 $196,731 $79,125 $61,440 $24,583 $10,476 $472,269 $370 $1,114,490 
Classified27,547 19,441 5,462 3,291 24 80 30 — 55,875 
Total commercial$297,043 $216,172 $84,587 $64,731 $24,607 $10,556 $472,299 $370 $1,170,365 
YTD gross charge-offs$100 $4,619 $4,493 $499 $44 $49 $— $— $9,804 
Factored receivables
Pass$1,075,428 $— $— $3,151 $— $— $— $— $1,078,579 
Classified18,714 — — 19,361 — — — — 38,075 
Total factored receivables$1,094,142 $— $— $22,512 $— $— $— $— $1,116,654 
YTD gross charge-offs$5,374 $2,293 $— $3,330 $— $— $— $— $10,997 
Consumer
Pass$4,141 $1,442 $593 $406 $83 $1,488 $40 $— $8,193 
Classified19 — 83 1 — 30 — — 133 
Total consumer$4,160 $1,442 $676 $407 $83 $1,518 $40 $— $8,326 
YTD gross charge-offs$519 $25 $12 $3 $— $4 $— $— $563 
Mortgage warehouse
Pass$728,847 $— $— $— $— $— $— $— $728,847 
Classified— — — — — — — — — 
Total mortgage warehouse$728,847 $— $— $— $— $— $— $— $728,847 
YTD gross charge-offs$— $— $— $— $— $— $— $— $— 
Total loans
Pass$2,449,634 $381,989 $204,998 $199,176 $48,703 $86,456 $600,200 $858 $3,972,014 
Classified138,709 20,107 7,274 23,687 187 905 217 — 191,086 
Total loans$2,588,343 $402,096 $212,272 $222,863 $48,890 $87,361 $600,417 $858 $4,163,100 
YTD gross charge-offs$6,106 $6,937 $4,505 $3,832 $44 $53 $— $— $21,477 
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Loan Modifications to Borrowers Experiencing Financial Difficulty
In an effort to mitigate potential losses on loans, the Company will endeavor to work with borrowers experiencing financial difficulty to modify the terms of such loans to improve the likelihood of principal repayment. Such modifications generally fall into four broad categories; principal forgiveness, interest rate reduction, other-than-insignificant payment delay, or a term extension. Modifications can reflect one or multiple modification categories. For all loan types, including commercial real estate loans, the Company considers the likelihood of repayment by the borrower experiencing financial difficulty under the potential agreed upon modified terms. If such repayment is not deemed likely, the Company will not grant the troubled borrower a modification and will commence ultimate collection proceedings. On an ongoing basis, the Company monitors the performance of modified loans related to their restructured terms.
The following tables present the amortized cost basis of loan modifications to borrowers experiencing financial difficulty made during the reporting period:
Term Extension
Three Months EndedNine Months Ended
(Dollars in thousands)Amortized Cost % of PortfolioAmortized Cost% of Portfolio
September 30, 2024
Commercial real estate$194 — %$194 — %
Commercial17 — %17 — %
Consumer— — %18 0.3 %
$211 — %$229 — %
September 30, 2023
Commercial real estate$111 — %$111 — %
1-4 family residential271 0.2 %271 0.2 %
Farmland762 1.2 %762 1.2 %
Commercial1,913 0.2 %1,913 0.2 %
$3,057 0.1 %$3,057 0.1 %
Term Extension and Rate Reduction
Three Months EndedNine Months Ended
(Dollars in thousands)Amortized Cost % of PortfolioAmortized Cost% of Portfolio
September 30, 2024
Commercial real estate$— — %$141 — %
$— — %$141 — %
September 30, 2023
Commercial real estate$83,344 10.2 %$83,344 10.2 %
Commercial549 — %549 — %
$83,893 1.9 %$83,893 1.9 %
Term Extension and Principal Forgiveness
Three Months EndedNine Months Ended
(Dollars in thousands)Amortized Cost % of PortfolioAmortized Cost% of Portfolio
September 30, 2024
Commercial$— — %$4,128 0.4 %
$— — %$4,128 0.1 %
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Term Extension and Payment Delay
Three Months EndedNine Months Ended
(Dollars in thousands)Amortized Cost % of PortfolioAmortized Cost% of Portfolio
September 30, 2024
Commercial$513 — %$513 — %
$513 — %$513 — %
The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty:
Term Extension
Three Months EndedNine Months Ended
September 30, 2024
Commercial real estate
Modification added a weighted average 0.3 years to the life of the modified loans.
Modification added a weighted average 0.8 years to the life of the modified loans.
Commercial
Modification added a weighted average 1.0 years to the life of the modified loans.
Modification added a weighted average 1.0 years to the life of the modified loans.
Consumer
N/A
Modification added a weighted average 6.1 years to the life of the modified loans.
September 30, 2023
Commercial real estate
Modification added a weighted average 0.3 years to the life of the modified loans.
Modification added a weighted average 0.9 years to the life of the modified loans.
1-4 family residential
Modification added a weighted average 0.5 years to the life of the modified loans.
Modification added a weighted average 0.5 years to the life of the modified loans.
Farmland
Modification added a weighted average 0.5 years to the life of the modified loans.
Modification added a weighted average 0.5 years to the life of the modified loans.
Commercial
Modification added a weighted average 0.5 years to the life of the modified loans.
Modification added a weighted average 0.6 years to the life of the modified loans.
Term Extension and Rate Reduction
Three Months EndedNine Months Ended
September 30, 2024
Commercial real estateN/A
Modification added a weighted average 1.0 years to the life of the modified loans and reduced the weighted average contractual interest rate from 12.5% to 10.0%.
September 30, 2023
Commercial real estate
Modification added a weighted average 0.5 years to the life of the modified loans and reduced the weighted average contractual interest rate from 10.1% to 5.1%.
Modification added a weighted average 0.5 years to the life of the modified loans and reduced the weighted average contractual interest rate from 10.1% to 5.1%.
Commercial
Modification added a weighted average 0.3 years to the life of the modified loans and reduced the weighted average contractual interest rate from 9.5% to 8.6%.
Modification added a weighted average 0.3 years to the life of the modified loans and reduced the weighted average contractual interest rate from 9.5% to 8.6%.
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Term Extension and Principal Forgiveness
Three Months EndedNine Months Ended
September 30, 2024
CommercialN/A
Modification added a weighted average 1.8 years to the life of the modified loans and resulted in principal forgiveness totaling 507,000.
Term Extension and Payment Delay
Three Months EndedNine Months Ended
September 30, 2024
Commercial
Modification added a weighted average 0.7 years to the life of the modified loans and provided a weighted average payment delay of 0.7 years.
Modification added a weighted average 0.7 years to the life of the modified loans and provided a weighted average payment delay of 0.7 years.
Generally, if a loan to a borrower experiencing financial difficulty is modified, the Company will seek to obtain credit enhancements when possible.
The following table presents the payment status of loans that have been modified in the last twelve months:
September 30, 2024
(Dollars in thousands)CurrentPast Due
30-89 Days		Past Due
90 Days or More		Total
Commercial real estate$23,733 $— $— $23,733 
1-4 family residential98 — — 98 
Commercial20,073 1,422 1,909 23,404 
Consumer18 — — 18 
$43,922 $1,422 $1,909 $47,253 
At September 30, 2024, the Company had no commitments to lend additional funds to borrowers experiencing financial difficulty for which the Company modified the terms of the loans in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension during the current period.
There were $1,909,000 of commercial loans to a borrower experiencing financial difficulty that had a payment default during the three and nine months ended September 30, 2024 and were modified in the form of a payment delay in the twelve months prior to that default. There were no loans to borrowers experiencing financial difficulty that had a payment default during the three and nine months ended September 30, 2023 and were modified in the twelve months prior to that default. Default is determined at 90 or more days past due, upon charge-off, or upon foreclosure. Modified loans in default are individually evaluated for the allowance for credit losses or if the modified loan is deemed uncollectible, the loan, or a portion of the loan, is written off and the allowance for credit losses is adjusted accordingly.
Residential Real Estate Loans In Process of Foreclosure
At September 30, 2024 and December 31, 2023, the Company had no 1-4 family residential real estate loans for which formal foreclosure proceedings were in process.
NOTE 4 — GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets consist of the following:
(Dollars in thousands)September 30, 2024December 31, 2023
Goodwill$233,709 $233,709 
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2024December 31, 2023
(Dollars in thousands)Gross Carrying
Amount		Accumulated
Amortization		Net Carrying
Amount		Gross Carrying
Amount		Accumulated
Amortization		Net Carrying
Amount
Core deposit intangibles$43,578 $(39,757)$3,821 $43,578 $(38,084)$5,494 
Customer relationship intangibles29,954 (22,311)7,643 29,954 (19,901)10,053 
Software intangible assets16,932 (14,110)2,822 16,932 (10,935)5,997 
Other intangible assets5,650 (2,620)3,030 3,498 (1,396)2,102 
$96,114 $(78,798)$17,316 $93,962 $(70,316)$23,646 
The changes in goodwill and intangible assets during the three and nine months ended September 30, 2024 and 2023 are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Beginning balance$254,652 $262,958 $257,355 $265,767 
Acquired intangible assets— — 2,920 3,042 
Amortization of intangibles(3,600)(2,849)(9,193)(8,700)
Amortization of intangibles included in lease income(27)— (57)— 
Ending balance$251,025 $260,109 $251,025 $260,109 
NOTE 5 — VARIABLE INTEREST ENTITIES
Collateralized Loan Obligation Funds – Closed
The Company holds investments in the subordinated notes of the following closed Collateralized Loan Obligation (“CLO”) funds:
(Dollars in thousands)Offering
Date		Offering
Amount
Trinitas CLO IV, LTD (Trinitas IV)June 2, 2016$406,650 
Trinitas CLO V, LTD (Trinitas V)September 22, 2016$409,000 
Trinitas CLO VI, LTD (Trinitas VI)June 20, 2017$717,100 
The net carrying amounts of the Company’s investments in the subordinated notes of the CLO funds, which represent the Company’s maximum exposure to loss as a result of its involvement with the CLO funds, totaled $2,121,000 and $2,977,000 at September 30, 2024 and December 31, 2023, respectively, and are classified as held to maturity securities within the Company’s consolidated balance sheets.
The Company performed a consolidation analysis to confirm whether the Company was required to consolidate the assets, liabilities, equity or operations of the closed CLO funds in its financial statements. The Company concluded that the closed CLO funds were variable interest entities and that the Company holds variable interests in the entities in the form of its investments in the subordinated notes of entities. However, the Company also concluded that the Company does not have the power to direct the activities that most significantly impact the entities’ economic performance. As a result, the Company was not the primary beneficiary and therefore was not required to consolidate the assets, liabilities, equity, or operations of the closed CLO funds in the Company’s financial statements.
NOTE 6 — LEGAL CONTINGENCIES
Various legal claims have arisen from time to time in the normal course of business which, in the opinion of management as of September 30, 2024, will have no material effect on the Company’s consolidated financial statements.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 — OFF-BALANCE SHEET LOAN COMMITMENTS
From time to time, the Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments.
The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet financial instruments.
The contractual amounts of financial instruments with off-balance sheet risk were as follows:
September 30, 2024December 31, 2023
(Dollars in thousands)Fixed RateVariable RateTotalFixed RateVariable RateTotal
Unused lines of credit$76,729 $289,897 $366,626 $53,822 $527,300 $581,122 
Standby letters of credit$17,258 $6,910 $24,168 $15,013 $9,356 $24,369 
Commitments to purchase loans$— $10,272 $10,272 $— $17,125 $17,125 
Mortgage warehouse commitments$— $791,828 $791,828 $— $895,896 $895,896 
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being fully drawn upon, the total commitment amounts disclosed above do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by the Company, upon extension of credit, is based on management’s credit evaluation of the customer.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. In the event of nonperformance by the customer, the Company has rights to the underlying collateral, which can include commercial real estate, physical plant and property, inventory, receivables, cash and marketable securities. The credit risk to the Company in issuing letters of credit is essentially the same as that involved in extending loan facilities to its customers.
Commitments to purchase loans represent loans purchased by the Company that have not yet settled.
Mortgage warehouse commitments are unconditionally cancellable and represent the unused capacity on mortgage warehouse facilities the Company has approved. The Company reserves the right to refuse to buy any mortgage loans offered for sale by a customer, for any reason, at the Company’s sole and absolute discretion.
The Company records an allowance for credit losses on off-balance sheet credit exposures through a charge to credit loss expense on the Company’s consolidated statements of income. At September 30, 2024 and December 31, 2023, the allowance for credit losses on off-balance sheet credit exposures totaled $2,808,000 and $2,838,000, respectively, and was included in other liabilities on the Company’s consolidated balance sheets. The following table presents credit loss expense for off balance sheet credit exposures:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Credit loss expense (benefit)$(1,132)$(253)$(30)$(596)
NOTE 8 — FAIR VALUE DISCLOSURES
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The methods of determining the fair value of assets and liabilities presented in this note are consistent with the methodologies disclosed in Note 16 of the Company’s 2023 Form 10-K.
Assets and liabilities measured at fair value on a recurring basis are summarized in the table below.
(Dollars in thousands)Fair Value Measurements UsingTotal
Fair Value
September 30, 2024Level 1Level 2Level 3
Assets measured at fair value on a recurring basis
Securities available for sale
Mortgage-backed securities, residential$— $75,149 $— $75,149 
Asset-backed securities— 924 — 924 
State and municipal— 3,443 — 3,443 
CLO securities— 322,088 — 322,088 
Corporate bonds— 275 — 275 
SBA pooled securities— 1,307 — 1,307 
$— $403,186 $— $403,186 
Equity securities with readily determinable fair values
Mutual fund$4,583 $— $— $4,583 
Loans held for sale$— $26 $— $26 
Indemnification asset$— $— $883 $883 
Revenue share asset$— $— $2,904 $2,904 
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)Fair Value Measurements UsingTotal
Fair Value
December 31, 2023Level 1Level 2Level 3
Assets measured at fair value on a recurring basis
Securities available for sale
Mortgage-backed securities, residential$— $55,839 $— $55,839 
Asset-backed securities— 1,170 — 1,170 
State and municipal— 4,515 — 4,515 
CLO Securities— 236,291 — 236,291 
Corporate bonds— 275 — 275 
SBA pooled securities— 1,554 — 1,554 
$— $299,644 $— $299,644 
Equity securities with readily determinable fair values
Mutual fund$4,488 $— $— $4,488 
Loans held for sale$— $1,236 $— $1,236 
Indemnification asset$— $— $1,497 $1,497 
Revenue share asset$— $— $2,516 $2,516 
There were no transfers between levels during 2024 or 2023.
Indemnification Asset
The fair value of the indemnification asset is calculated as the present value of the estimated cash payments expected to be received from Covenant for probable losses on the covered Over-Formula Advance Portfolio acquired during 2020. The cash flows are discounted at a rate to reflect the uncertainty of the timing and receipt of the payments from Covenant. The indemnification asset is reviewed quarterly and changes to the asset are recorded as adjustments to other noninterest income or expense, as appropriate, within the Consolidated Statements of Income. The indemnification asset fair value is considered a Level 3 classification. At September 30, 2024 and December 31, 2023, the estimated cash payments expected to be received from Covenant for probable losses on the covered Over-Formula Advance Portfolio were approximately $930,000 and $1,575,000, respectively, and a discount rate of 5.0% and 5.0%, respectively, was applied to calculate the present value of the indemnification asset. A reconciliation of the opening balance to the closing balance of the fair value of the indemnification asset is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Beginning balance$1,088 $1,905 $1,497 $3,896 
Indemnification asset recognized in business combination— — — — 
Change in fair value of indemnification asset recognized in earnings(205)(204)(614)(530)
Indemnification reduction— — — (1,665)
Ending balance$883 $1,701 $883 $1,701 
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Revenue Share Asset
On June 30, 2022 and September 6, 2022, the Company entered into and closed two separate agreements to sell two separate portfolios of factored receivables. The June 30, 2022 agreement contains revenue share provisions that entitles the Company to an amount equal to fifteen percent of the future gross monthly revenue of the clients associated with the sold factored receivable portfolio. The September 6, 2022 agreement contains revenue share provisions that entitles the Company to an amount ranging from fifteen to twenty percent, depending on the client, of the future gross monthly revenue of the clients associated with the sold factored receivable portfolio. The fair value of the revenue share assets is calculated each reporting period, and changes in the fair value of the revenue share assets are recorded in noninterest income in the consolidated statements of income. The revenue share asset fair value is considered a Level 3 classification.
At September 30, 2024 and December 31, 2023, the estimated cash payments expected to be received from the purchaser for the Company's share of future gross monthly revenue as $3,961,000 and $3,329,000, respectively, and a discount rate of 10.0% was applied to calculate the present value of the revenue share asset. A reconciliation of the opening balance to the closing balance of the fair value of the revenue share asset is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Beginning balance$2,789 $3,053 $2,516 $5,515 
Revenue share asset recognized — — — — 
Change in fair value of revenue share asset recognized in earnings416 (78)1,295 (1,867)
Revenue share payments received(301)(279)(907)(952)
Ending balance$2,904 $2,696 $2,904 $2,696 
Assets measured at fair value on a non-recurring basis are summarized in the table below. There were no liabilities measured at fair value on a non-recurring basis at September 30, 2024 and December 31, 2023.
(Dollars in thousands)Fair Value Measurements UsingTotal
Fair Value
September 30, 2024Level 1Level 2Level 3
Collateral dependent loans
Commercial real estate$— $— $783 $783 
1-4 family residential— — 21 21 
Commercial— — 27,869 27,869 
Factored receivables— — 31,855 31,855 
$— $— $60,528 $60,528 
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)Fair Value Measurements UsingTotal
Fair Value
December 31, 2023Level 1Level 2Level 3
Collateral dependent loans
Commercial real estate$— $— $1,480 $1,480 
1-4 family residential— — 37 37 
Commercial— — 20,870 20,870 
Factored receivables— — 32,860 32,860 
$— $— $55,247 $55,247 
Collateral Dependent Loans Specific Allocation of ACL:    A loan is considered to be a collateral dependent loan when, based on current information and events, the Company expects repayment of the financial assets to be provided substantially through the operation or sale of the collateral and the Company has determined that the borrower is experiencing financial difficulty as of the measurement date. The ACL is measured by estimating the fair value of the loan based on the present value of expected cash flows, the market price of the loan, or the underlying fair value of the loan’s collateral. For real estate loans, fair value of the loan’s collateral is determined by third party appraisals, which are then adjusted for the estimated selling and closing costs related to liquidation of the collateral. For this asset class, the actual valuation methods (income, sales comparable, or cost) vary based on the status of the project or property. For example, land is generally based on the sales comparable method while construction is based on the income and/or sales comparable methods. The unobservable inputs may vary depending on the individual assets with no one of the three methods being the predominant approach. The Company reviews the third party appraisal for appropriateness and adjusts the value downward to consider selling and closing costs, which typically range from 5% to 8% of the appraised value. For non-real estate loans, fair value of the loan’s collateral may be determined using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business.
The estimated fair values of the Company’s financial instruments not measured at fair value on a recurring or non-recurring basis at September 30, 2024 and December 31, 2023 were as follows:
(Dollars in thousands)Carrying
Amount		Fair Value Measurements UsingTotal
Fair Value
September 30, 2024Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$489,280 $489,280 $— $— $489,280 
Securities - held to maturity2,121 — — 2,503 2,503 
Loans not previously presented, gross4,272,439 60,618 — 4,166,626 4,227,244 
FHLB and other restricted stock7,112  N/A  N/A  N/A N/A
Accrued interest receivable41,591 41,591 — — 41,591 
Financial liabilities:
Deposits4,706,694 — 4,703,215 — 4,703,215 
Federal Home Loan Bank advances30,000 — 30,000 — 30,000 
Subordinated notes109,072 — 95,793 — 95,793 
Junior subordinated debentures42,196 — 43,443 — 43,443 
Accrued interest payable7,943 7,943 — — 7,943 

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)Carrying
Amount		Fair Value Measurements UsingTotal
Fair Value
December 31, 2023Level 1Level 2Level 3
Financial assets:
Cash and cash equivalents$286,635 $286,635 $— $— $286,635 
Securities - held to maturity2,977 — — 4,015 4,015 
Loans not previously presented, gross4,107,853 105,145 — 3,944,193 4,049,338 
FHLB and other restricted stock14,278 N/AN/AN/AN/A
Accrued interest receivable34,597 34,597 — — 34,597 
Financial liabilities:
Deposits3,977,478 — 3,971,391 — 3,971,391 
Federal Home Loan Bank advances255,000 — 255,000 — 255,000 
Subordinated notes108,678 — 90,084 — 90,084 
Junior subordinated debentures41,740 — 43,072 — 43,072 
Accrued interest payable7,429 7,429 — — 7,429 
NOTE 9 — REGULATORY MATTERS
The Company (on a consolidated basis) and TBK Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s or TBK Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and TBK Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company and TBK Bank to maintain minimum amounts and ratios (set forth in the table below) of total, common equity Tier 1, and Tier 1 capital to risk weighted assets, and of Tier 1 capital to average assets. Management believes, as of September 30, 2024 and December 31, 2023, the Company and TBK Bank meet all capital adequacy requirements to which they are subject.
As of September 30, 2024 and December 31, 2023, TBK Bank’s capital ratios exceeded those levels necessary to be categorized as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” TBK Bank must maintain minimum total risk based, common equity Tier 1 risk based, Tier 1 risk based, and Tier 1 leverage ratios as set forth in the table below. There are no conditions or events since September 30, 2024 that management believes have changed TBK Bank’s category.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The actual capital amounts and ratios for the Company and TBK Bank are presented in the following table.
(Dollars in thousands)ActualMinimum for Capital
Adequacy Purposes		To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
September 30, 2024AmountRatioAmountRatioAmountRatio
Total capital (to risk weighted assets)
Triumph Financial, Inc.$842,621 16.6%$405,546 8.0% N/A N/A
TBK Bank, SSB$802,272 15.9%$403,326 8.0%$504,158 10.0%
Tier 1 capital (to risk weighted assets)
Triumph Financial, Inc.$688,077 13.6%$304,160 6.0% N/A N/A
TBK Bank, SSB$760,029 15.1%$302,495 6.0%$403,326 8.0%
Common equity Tier 1 capital (to risk weighted assets)
Triumph Financial, Inc.$600,881 11.9%$228,120 4.5% N/A N/A
TBK Bank, SSB$760,029 15.1%$226,871 4.5%$327,703 6.5%
Tier 1 capital (to average assets)
Triumph Financial, Inc.$688,077 12.2%$225,354 4.0% N/A N/A
TBK Bank, SSB$760,029 13.5%$225,191 4.0%$281,489 5.0%
As of December 31, 2023
Total capital (to risk weighted assets)
Triumph Financial, Inc.$806,667 16.7%$385,370 8.0%N/AN/A
TBK Bank, SSB$758,656 15.9%$382,508 8.0%$478,135 10.0%
Tier 1 capital (to risk weighted assets)
Triumph Financial, Inc.$661,833 13.7%$289,027 6.0%N/AN/A
TBK Bank, SSB$725,383 15.2%$286,881 6.0%$382,508 8.0%
Common equity Tier 1 capital (to risk weighted assets)
Triumph Financial, Inc.$575,093 11.9%$216,770 4.5%N/AN/A
TBK Bank, SSB$725,383 15.2%$215,161 4.5%$310,787 6.5%
Tier 1 capital (to average assets)
Triumph Financial, Inc.$661,833 12.6%$209,518 4.0%N/AN/A
TBK Bank, SSB$725,383 13.9%$209,406 4.0%$261,758 5.0%
As permitted by the interim final rule issued on March 27, 2020 by the federal banking regulatory agencies, the Company elected the option to delay the estimated impact on regulatory capital of ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which was effective January 1, 2020. The initial impact of adoption of ASU 2016-13 as well as 25% of the quarterly increases in the allowance for credit losses subsequent to adoption of ASU 2016-13 (collectively the “transition adjustments”) was delayed for two years. After two years, the cumulative amount of the transition adjustments became fixed and will be phased out of the regulatory capital calculations evenly over a three-year period, with 75% recognized in year three, 50% recognized in year four, and 25% recognized in year five. After five years, the temporary regulatory capital benefits will be fully reversed.
Dividends paid by TBK Bank are limited to, without prior regulatory approval, current year earnings and earnings less dividends paid during the preceding two years.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The capital conservation buffer set forth by the Basel III regulatory capital framework was 2.5% at September 30, 2024 and December 31, 2023. The capital conservation buffer is designed to absorb losses during periods of economic stress and requires increased capital levels for the purpose of capital distributions and other payments. Failure to meet the full amount of the buffer will result in restrictions on the Company’s ability to make capital distributions, including dividend payments and stock repurchases, and to pay discretionary bonuses to executive officers. At September 30, 2024 and December 31, 2023, the Company’s and TBK Bank’s risk based capital exceeded the required capital conservation buffer.
NOTE 10 — STOCKHOLDERS' EQUITY
The following summarizes the capital structure of Triumph Financial, Inc.
Preferred Stock Series C
(Dollars in thousands, except per share amounts)September 30, 2024December 31, 2023
Shares authorized51,750 51,750 
Shares issued45,000 45,000 
Shares outstanding45,000 45,000 
Par value per share$0.01 $0.01 
Liquidation preference per share$1,000 $1,000 
Liquidation preference amount$45,000 $45,000 
Dividend rate7.125 %7.125 %
Dividend payment dates Quarterly Quarterly
Common Stock
September 30, 2024December 31, 2023
Shares authorized50,000,000 50,000,000 
Shares issued29,117,265 28,986,255 
Treasury shares(5,729,743)(5,683,841)
Shares outstanding23,387,522 23,302,414 
Par value per share$0.01 $0.01 
Stock Repurchase Programs
On February 1, 2023, the Company entered into an accelerated share repurchase (“ASR”) agreement to repurchase $70,000,000 of the Company’s common stock. The ASR is part of the Company’s previously announced plan to repurchase up to $100,000,000 of the Company’s common stock and is within the remaining amount authorized by the Company’s Board of Directors pursuant to such plan. Under the terms of the ASR agreement, the Company received an initial delivery of 961,373 common shares representing approximately 80% of the expected total to be repurchased. On April 28, 2023, the ASR was completed and the Company received an additional delivery of 247,954 common shares.
NOTE 11 — STOCK BASED COMPENSATION
Stock based compensation expense that has been charged against income was $4,026,000 and $3,714,000 for the three months ended September 30, 2024 and 2023, respectively, and $11,092,000 and $9,915,000 for the nine months ended September 30, 2024 and 2023, respectively.
2014 Omnibus Incentive Plan
The Company’s 2014 Omnibus Incentive Plan (“Omnibus Incentive Plan”) provides for the grant of nonqualified and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other awards that may be settled in, or based upon the value of, the Company’s common stock. The maximum number of shares of common stock available for issuance under the Omnibus Incentive Plan is 2,900,000 shares.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Restricted Stock Awards
A summary of changes in the Company’s nonvested Restricted Stock Awards (“RSAs”) under the Omnibus Incentive Plan for the nine months ended September 30, 2024 were as follows:
Nonvested RSAsSharesWeighted-Average
Grant-Date
Fair Value
Nonvested at January 1, 2024122,931 77.14 
Granted— — 
Vested(73,726)68.57 
Forfeited(278)54.52 
Nonvested at September 30, 202448,927 90.18 
RSAs granted to employees under the Omnibus Incentive Plan typically vest immediately or over four years. Compensation expense for the RSAs will be recognized over the vesting period of the awards based on the fair value of the stock at the issue date. As of September 30, 2024, there was $595,000 of unrecognized compensation cost related to the nonvested RSAs. The cost is expected to be recognized over a remaining period of 0.67 years.
Restricted Stock Units
A summary of changes in the Company’s nonvested Restricted Stock Units (“RSUs”) under the Omnibus Incentive Plan for the nine months ended September 30, 2024 were as follows:
Nonvested RSUsSharesWeighted-Average
Grant-Date
Fair Value
Nonvested at January 1, 2024230,034 63.30 
Granted75,571 72.70 
Vested(69,623)65.26 
Forfeited(6,089)56.89 
Nonvested at September 30, 2024229,893 65.97 
RSUs granted to employees under the Omnibus Incentive Plan typically vest over four years. Compensation expense for the RSUs will be recognized over the vesting period of the awards based on the fair value of the stock at the issue date. As of September 30, 2024, there was $7,599,000 of unrecognized compensation cost related to the nonvested RSUs. The cost is expected to be recognized over a remaining period of 2.78 years.
Market Based Performance Stock Units
A summary of changes in the Company’s nonvested Market Based Performance Stock Units (“Market Based PSUs”) under the Omnibus Incentive Plan for the nine months ended September 30, 2024 were as follows:
Nonvested Market Based PSUsSharesWeighted-Average
Grant-Date
Fair Value
Nonvested at January 1, 2024116,080 $81.74 
Granted63,720 114.72 
Performance adjustment(2,841)— 
Vested(8,987)98.03 
Forfeited(192)98.03 
Nonvested at September 30, 2024167,780 $93.10 
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Market Based PSUs granted to employees under the Omnibus Incentive Plan vest after three years. The number of shares issued upon vesting will range from 0% to 175% of the Market Based PSUs granted based on the Company’s relative total shareholder return (“TSR”) as compared to the TSR of specified groups of peer banks and financial technology companies, and with respect to the Company's 2023 and 2024 awards may include an additional multiplier of up to 200% of the otherwise earned award based on the Company's absolute TSR. Compensation expense for the Market Based PSUs will be recognized over the vesting period of the awards based on the fair value of the award at the grant date. The fair value of Market Based PSUs granted is estimated using a Monte Carlo simulation. Expected volatilities were determined based on the historical volatilities of the Company and the specified peer group. The risk-free interest rate for the performance period was derived from the Treasury constant maturities yield curve on the valuation dates.
The fair value of the Market Based PSUs granted was determined using the following weighted-average assumptions:
Nine Months Ended September 30,
20242023
Grant dateMay 1, 2023May 1, 2023
Performance period3.00 years3.00 years
Stock price$72.00 $51.25 
Triumph Financial stock price volatility42.31 %49.33 %
Risk-free rate4.67 %3.76 %
As of September 30, 2024, there was $6,898,000 of unrecognized compensation cost related to the nonvested Market Based PSUs. The cost is expected to be recognized over a remaining period of 2.20 years.
Stock Options
A summary of the changes in the Company’s stock options under the Omnibus Incentive Plan for the nine months ended September 30, 2024 were as follows:
Stock OptionsSharesWeighted-Average
Exercise Price		Weighted-Average
Remaining
Contractual Term
(In Years)		Aggregate
Intrinsic Value
(In Thousands)
Outstanding at January 1, 2024232,994 $43.40 
Granted47,376 72.00 
Exercised(15,751)26.97 
Forfeited or expired— — 
Outstanding at September 30, 2024264,619 $49.50 6.27$8,104 
Fully vested shares and shares expected to vest at September 30, 2024264,619 $49.50 6.27$8,104 
Shares exercisable at September 30, 2024155,648 $39.12 4.50$6,408 
Information related to the stock options for the nine months ended September 30, 2024 and 2023 was as follows:
Nine Months Ended September 30,
(Dollars in thousands, except per share amounts)20242023
Aggregate intrinsic value of options exercised$895 $140 
Cash received from option exercises, net425 (52)
Tax benefit realized from option exercises188 29 
Weighted average fair value per share of options granted$37.30 $25.20 
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Stock options awarded to employees under the Omnibus Incentive Plan are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant, vest over four years, and have ten year contractual terms. The fair value of stock options granted is estimated at the date of grant using the Black-Scholes option-pricing model. Expected volatilities are determined based on the Company’s historical volatility. The expected term of the options granted is determined based on the SEC simplified method, which calculates the expected term as the mid-point between the weighted average time to vesting and the contractual term. The risk-free interest rate for the expected term of the options is derived from the Treasury constant maturity yield curve on the valuation date.
The fair value of the stock options granted was determined using the following weighted-average assumptions:
Nine Months Ended September 30,
20242023
Risk-free interest rate4.52 %3.38 %
Expected term6.25 years6.25 years
Expected stock price volatility46.50 %45.65 %
Dividend yield— — 
As of September 30, 2024, there was $1,948,000 of unrecognized compensation cost related to nonvested stock options granted under the Omnibus Incentive Plan. The cost is expected to be recognized over a remaining period of 3.06 years.
Employee Stock Purchase Plan
During the year ended December 31, 2019, the Company’s Board of Directors adopted, and the Company’s stockholders approved, the Company's 2019 Employee Stock Purchase Plan (“ESPP”). Under the ESPP, 2,500,000 shares of common stock were reserved for issuance. The ESPP enables eligible employees to purchase the Company’s common stock at a price per share equal to 85% of the lower of the fair market value of the common stock at the beginning or end of each six month offering period. During the nine months ended September 30, 2024 and 2023, 36,649 shares and 37,909 shares, respectively, were issued under the plan.
NOTE 12 — EARNINGS PER SHARE
The factors used in the earnings per share computation follow:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Basic
Net income to common stockholders$4,546 $11,993 $9,848 $29,050 
Weighted average common shares outstanding23,330,635 23,162,614 23,268,887 23,220,331 
Basic earnings per common share$0.19 $0.52 $0.42 $1.25 
Diluted
Net income to common stockholders$4,546 $11,993 $9,848 $29,050 
Weighted average common shares outstanding23,330,635 23,162,614 23,268,887 23,220,331 
Dilutive effects of:
Assumed exercises of stock options95,472 82,909 89,349 77,286 
Restricted stock awards40,259 80,841 67,805 101,842 
Restricted stock units130,331 84,137 129,047 86,844 
Performance stock units - market based128,157 47,248 117,101 85,218 
Employee stock purchase program470 1,165 1,774 908 
Average shares and dilutive potential common shares23,725,324 23,458,914 23,673,963 23,572,429 
Diluted earnings per common share$0.19 $0.51 $0.42 $1.23 
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Shares that were not considered in computing diluted earnings per common share because they were antidilutive are as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Stock options64,315 101,138 43,389 104,114 
Restricted stock awards— — — — 
Restricted stock units7,500 11,250 7,818 11,250 
Performance stock units - market based— 14,424 24,798 14,424 
Employee stock purchase program— — — — 
NOTE 13 — REVENUE FROM CONTRACTS WITH CUSTOMERS
The Company records revenue from contracts with customers in accordance with Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“Topic 606”). Under Topic 606, the Company must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the Company satisfies a performance obligation. The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices can be fixed or variable; charged either on a periodic basis or based on activity. Except as disclosed below, the Company presents disaggregated revenue from contracts with customers in the consolidated statements of income.
Banking and Factoring Segments
The Banking segment derives its revenue principally from investments in interest-earning assets as well as noninterest income typical for the banking industry, and the Factoring segment derives the large majority of its revenue from interest income on purchased factored receivables. The majority of such revenue streams fall under Accounting Standards Codification Topic 310, “Receivables” (“Topic 310”) which is outside the scope of Topic 606. There are, however, certain Banking and Factoring activities that generate revenue under Topic 606. Descriptions of the Company's significant Banking and Factoring revenue-generating activities within the scope of Topic 606, which are included in non-interest income in the Company's consolidated statements of income, are as follows:
•Service charges on deposits. Service charges on deposits primarily consists of fees from the Company's deposit customers for account maintenance, account analysis, and overdraft services. Account maintenance fees and analysis fees are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs.
•Card income. Card income primarily consists of interchange fees. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized when the transaction processing services are provided to the cardholder.
•Net OREO gains (losses) and valuation adjustments. The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer.
•Fee income. Fee income for the Banking and Factoring segments primarily consists of transaction-based fees, including wire transfer fees, ACH and check fees, early termination fees, and other fees, earned from the Company's banking and factoring customers. Transaction based fees are recognized at the time the transaction is executed as that is the point in time the Company satisfies its performance obligations.
•Insurance commissions. Insurance commissions are earned for brokering insurance policies. The Company's primary performance obligations for insurance commissions are satisfied and revenue is recognized when the brokered insurance policies are executed.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Payments Segment
The Payments segment derives a portion of its revenue from interest income on factored receivables and commercial loans related to invoice payments. These factored receivables consist of (i) invoices where we offer a Carrier a quick pay opportunity to receive payment at a discount in advance of the standard payment term for such invoice in exchange for the assignment of such invoice to us and (ii) factoring transactions where we purchase receivables payable to such freight brokers from their shipper clients. The Payments segment also offers commercial loans that result from our offering certain Brokers an additional liquidity option through the ability to settle their invoices with us on an extended term following our payment to their Carriers. The balance of such commercial loans was $0 at September 30, 2024 and December 31, 2023. Such revenue falls under Topic 310 and is outside the scope of Topic 606.
The Payments segment under its brand name, TriumphPay, connects Brokers, Shippers, Factors and Carriers through forward-thinking solutions that help each party successfully manage the life cycle of invoice presentment for services provided by Carrier through TriumphPay’s processing and audit of such invoice to its ultimate payment to the Carrier or the Factor. The Payments segment earns transaction revenue for such services from fees paid by its customers to receive auditing and payment processing of their invoices. Transaction revenue is recorded in Fee Income on the Consolidated Statements of Income and is subject to Topic 606. Transaction fees can be variable in nature. When such fees are variable, they are typically based upon the number of audit and payment transactions executed during a stated period; generally a calendar month. The customer is charged either a set fee per transaction or a set minimum fee for a stated number of transactions with the variable component being a per-invoice amount for transactions exceeding the stated minimum number. When applicable, the stated minimum number of transactions typically resets on a monthly basis. Transaction volume and related variable fees are known and recognized at each reporting period. Transaction fees can also be fixed in nature with such fees reflecting a set annual amount that is recognized ratably over the terms of the related contracts. In both variable and fixed arrangements, customers are typically billed monthly in arrears with payment due on 30 day terms and as such, no revenue is deferred.
The Payments segment also earns network fees for providing its customers access to the TriumphPay network. Network fees are recorded in Fee Income on the Consolidated Statements of Income and are subject to Topic 606. Network fees are generally a fixed annual amount and are recognized ratably over the terms of the related contracts. Customers are typically billed monthly in arrears with payment due on 30 day terms and as such, no revenue is deferred.
The Payments segment's service comprises a single performance obligation to provide stand-ready access to its payments and audit platforms for its customers which is satisfied over time as services are rendered. Given the nature of its services and related revenue, no significant judgments are made in applying Topic 606 and there are no refund, warranty, or similar obligations.
The Payments segment's contracts with its customers are usually short-term in nature and can generally be terminated by either party without a termination penalty or refund after the notice period has lapsed. Therefore, the contracts are defined at the transaction level and do not extend beyond the service already provided. The contracts generally renew automatically without any significant material rights. Some of the contracts include tiered pricing, which is based primarily on volume. The fee charged per transaction is adjusted up or down based on the volume processed for a specified period. Management has concluded that this volume-based pricing approach does not constitute a future material right since changes in the fee ranges are typically offered to classes of customers with similar volume.
The Payments segment recognizes fees charged to its customers on a gross basis as transaction revenue as it is the principal in respect of completing Payments segment transactions. As a principal to the transaction, the Payments segment controls the services on its platforms. The Payments segment bears primary responsibility for the fulfillment of the services, contracts directly with its customers, controls the product specifications, and defines the value proposal from its services. Further, the Payments segment has full discretion in determining the fee charged to its customers. The Payments segment is also responsible for providing customer support.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Capitalized contract costs consist of (i) deferred sales commissions that are incremental costs of obtaining customer contracts and (ii) deferred set-up costs, primarily direct payroll costs, for implementation services provided to customers prior to the launching of the Company’s products for general availability (go-live) to customers. Deferred sales commissions are amortized ratably over two years, taking into consideration the initial contract term, expected renewal periods, and sales commissions paid on such renewal periods. Deferred set-up costs are amortized ratably over four years which estimates the benefit period of the capitalized costs starting on the go-live date of the service. Deferred sales commissions and deferred set-up costs were included in other assets in the accompanying consolidated balance sheets and were $347,000 and $1,209,000, respectively, at September 30, 2024 and $394,000 and $505,000, respectively, at December 31, 2023. The amortization of deferred sales commissions and deferred set-up costs is included in salaries and employee benefits in the consolidated statements of income and was not significant for the nine months ended September 30, 2024 and 2023.
Given the nature of services provided, the Payments segment does not carry any material contract balances.
The table below shows the Payments segment’s revenue from transaction and network fees from external customers, which are disaggregated by customer category.
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Broker fee income$4,804 $3,372 $13,311 $8,335 
Factor fee income1,339 1,312 3,930 3,955 
Other fee income42 96 196 $280 
Total fee income$6,185 $4,780 $17,437 $12,570 
NOTE 14 — LESSOR OPERATING LEASES
The table below shows the Company's revenue from operating leases, which is included in non-interest income in the Company's consolidated statements of income.
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
Fixed payments$978 $— $2,073 $— 
Variable payments441 — 994 — 
Amortization of intangibles included in lease income(27)— (57)$— 
Total fee income$1,392 $— $3,010 $— 
NOTE 15 — BUSINESS SEGMENT INFORMATION
The Company's reportable segments are Banking, Factoring, and Payments, which have been determined based upon their business processes and economic characteristics. This determination also gave consideration to the structure and management of various product lines. The Banking segment includes the operations of TBK Bank. The Banking segment derives its revenue principally from investments in interest earning assets as well as noninterest income typical for the banking industry. The Factoring segment includes the operations of Triumph Financial Services with revenue derived from factoring services. The Payments segment includes the operations of TBK Bank's TriumphPay division, which provides a presentment, audit, and payment solution to Shipper, Broker, and Factor clients in the trucking industry. The Payments segment derives its revenue from transaction fees and interest income on factored receivables related to invoice payments. These factored receivables consist of both invoices where we offer a Carrier a quickpay opportunity to receive payment at a discount in advance of the standard payment term for such invoice in exchange for the assignment of such invoice to us and from offering Brokers the ability to settle their invoices with us on an extended term following our payment to their Carriers as an additional liquidity option for such Brokers.
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Prior to September 30, 2024, the Company disclosed Corporate as a reportable segment. The Company has determined that what was previously deemed the Corporate reportable segment consists of other business activities that do not represent a reportable segment, but rather, such activities belong in a Corporate and Other category as reported in the tabular disclosure below. It should be noted that such restructuring of the tabular disclosure did not result in any changes to the Company's revenue and expense allocation methodology described below. The Company restructured prior period tabular disclosures to achieve appropriate comparability.
Expenses that are directly attributable to the Company's Banking, Factoring, and Payments segments such as, but not limited to, occupancy, salaries and benefits to employees that are fully dedicated to the segment, and certain technology costs that can be attributed to specific users or functional areas within the segment are allocated as such. The Company continues to make considerable investments in shared services that benefit the entire organization and these expenses are allocated to the Corporate and Other category. The Company allocates such expenses to the Corporate and Other category in order for the Company's chief operating decision maker and investors to have clear visibility into the operating performance of each reportable segment.
The Company allocates intersegment interest expense to the Factoring and Payments segments based on one-month term SOFR for their funding needs. When the Payments segment is self-funded, with customer deposit funding in excess of its factored receivables, intersegment interest income is allocated based on the Federal Funds effective rate. Management believes that such intersegment interest allocations appropriately reflect the current interest rate environment.
Reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data. With the exception of the Corporate and Other discussion above, the accounting policies of the segments are substantially the same as those described in the “Summary of Significant Accounting Policies” in Note 1 of the Company’s 2023 Form 10-K.
Transactions between segments consist primarily of borrowed funds, payment network fees, and servicing fees. Intersegment interest expense is allocated to the Factoring and Payments segments as described above. Payment network fees are paid by the Factoring segment to the Payments segment for use of the payments network. Beginning prospectively on June 1, 2023, factoring transactions with freight broker clients were transferred from our Factoring segment to our Payments segment to align with TriumphPay's supply chain finance product offerings. Servicing fees are paid by the Payments segment to the Factoring segment for servicing such product. Beginning prospectively on January 1, 2024, the Factoring and Payments segments began paying fees to our Banking segment for the Banking segment's execution of various banking services that benefit those segments. Credit loss expense is allocated based on the segment’s ACL determination. Noninterest income and expense directly attributable to a segment are assigned to the related segment. Various shared service costs such as human resources, accounting, finance, risk management and information technology expense are assigned to the Corporate and Other category if they are not directly attributable to a segment . Taxes are paid on a consolidated basis and are not allocated for segment purposes.
(Dollars in thousands)TotalCorporate
Three months ended September 30, 2024BankingFactoringPaymentsSegments
and Other(1)
Consolidated
Total interest income$67,390 $34,905 $5,693 $107,988 $87 $108,075 
Intersegment interest allocations6,711 (9,280)2,569 — — — 
Total interest expense16,976 — — 16,976 2,400 19,376 
Net interest income (expense)57,125 25,625 8,262 91,012 (2,313)88,699 
Credit loss expense (benefit)3,719 328 (5)4,042 221 4,263 
Net interest income after credit loss expense53,406 25,297 8,267 86,970 (2,534)84,436 
Noninterest income7,538 2,170 6,322 16,030 1,467 17,497 
Noninterest expense32,009 19,969 16,598 68,576 27,070 95,646 
Net intersegment noninterest income (expense)(2)
139 465 (604)— — — 
Net income (loss) before income tax expense$29,074 $7,963 $(2,613)$34,424 $(28,137)$6,287 
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)TotalCorporate
Three months ended September 30, 2023BankingFactoringPaymentsSegments
and Other(1)
Consolidated
Total interest income$68,328 $34,244 $4,917 $107,489 $44 $107,533 
Intersegment interest allocations8,330 (9,664)1,334 — — — 
Total interest expense13,723 — — 13,723 2,483 16,206 
Net interest income (expense)62,935 24,580 6,251 93,766 (2,439)91,327 
Credit loss expense (benefit)410 375 14 799 13 812 
Net interest income after credit loss expense62,525 24,205 6,237 92,967 (2,452)90,515 
Noninterest income5,978 2,546 4,817 13,341 69 13,410 
Noninterest expense31,503 18,371 14,556 64,430 21,829 86,259 
Net intersegment noninterest income (expense)(2)
— 242 (242)— — — 
Net income (loss) before income tax expense$37,000 $8,622 $(3,744)$41,878 $(24,212)$17,666 
(Dollars in thousands)TotalCorporate
Nine months ended September 30, 2024BankingFactoringPaymentsSegments
and Other(1)
Consolidated
Total interest income$198,284 $101,964 $16,571 $316,819 $218 $317,037 
Intersegment interest allocations20,643 (27,383)6,740 — — — 
Total interest expense47,193 — — 47,193 7,195 54,388 
Net interest income (expense)171,734 74,581 23,311 269,626 (6,977)262,649 
Credit loss expense (benefit)10,207 3,859 55 14,121 193 14,314 
Net interest income after credit loss expense161,527 70,722 23,256 255,505 (7,170)248,335 
Noninterest income21,613 7,089 17,732 46,434 3,229 49,663 
Noninterest expense96,003 59,357 50,153 205,513 77,847 283,360 
Net intersegment noninterest income (expense)(2)
397 1,227 (1,624)— — — 
Net income (loss) before income tax expense$87,534 $19,681 $(10,789)$96,426 $(81,788)$14,638 
(Dollars in thousands)TotalCorporate
Nine months ended September 30, 2023BankingFactoringPaymentsSegments
and Other(1)
Consolidated
Total interest income$193,678 $108,769 $11,115 $313,562 $131 $313,693 
Intersegment interest allocations23,420 (28,176)4,756 — — — 
Total interest expense30,305 — — 30,305 7,228 37,533 
Net interest income (expense)186,793 80,593 15,871 283,257 (7,097)276,160 
Credit loss expense (benefit)3,164 2,405 55 5,624 444 6,068 
Net interest income after credit loss expense183,629 78,188 15,816 277,633 (7,541)270,092 
Noninterest income17,998 5,104 12,643 35,745 198 35,943 
Noninterest expense95,677 60,358 46,912 202,947 62,989 265,936 
Net intersegment noninterest income (expense)(2)
— (120)120 — — — 
Net income (loss) before income tax expense$105,950 $22,814 $(18,333)$110,431 $(70,332)$40,099 
(1) Includes revenue and expense from the Company’s holding company, which does not meet the definition of an operating segment. Also includes corporate shared service costs such as the majority of salaries and benefits expense for the Company's executive leadership team, as well as other selling, general, and administrative shared services costs including human resources, accounting, finance, risk management and a significant amount of information technology expense.
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TRIUMPH FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(2) Net intersegment noninterest income (expense) includes:
(Dollars in thousands)BankingFactoringPayments
Three Months Ended September 30, 2024
Factoring revenue received from Payments$— $864 $(864)
Payments revenue received from Factoring— (289)289 
Banking revenue received from Payments and Factoring139 (110)(29)
Net intersegment noninterest income (expense)$139 $465 $(604)
Three Months Ended September 30, 2023
Factoring revenue received from Payments$— $510 $(510)
Payments revenue received from Factoring— (268)268 
Banking revenue received from Payments and Factoring— — — 
Net intersegment noninterest income (expense)$— $242 $(242)
Nine months ended September 30, 2024
Factoring revenue received from Payments$— $2,364 $(2,364)
Payments revenue received from Factoring— (818)818 
Banking revenue received from Payments and Factoring397 (319)(78)
Net intersegment noninterest income (expense)$397 $1,227 $(1,624)
Nine months ended September 30, 2023
Factoring revenue received from Payments$— $680 $(680)
Payments revenue received from Factoring— (800)800 
Banking revenue received from Payments and Factoring— — — 
Net intersegment noninterest income (expense)$— $(120)$120 
Total assets and gross loans below include intersegment loans, which eliminate in consolidation.
(Dollars in thousands)TotalCorporate
September 30, 2024BankingFactoringPaymentsSegmentsand OtherEliminationsConsolidated
Total assets$5,357,731 $1,165,591 $526,467 $7,049,789 $1,151,899 $(2,335,642)$5,866,046 
Gross loans$3,716,900 $1,033,783 $169,862 $4,920,545 $— $(587,578)$4,332,967 
(Dollars in thousands)TotalCorporate
December 31, 2023BankingFactoringPaymentsSegmentsand OtherEliminationsConsolidated
Total assets$4,918,527 $1,077,367 $546,985 $6,542,879 $1,056,646 $(2,252,191)$5,347,334 
Gross loans$3,595,527 $941,926 $174,728 $4,712,181 $— $(549,081)$4,163,100 
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ITEM 2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section presents management’s perspective on our financial condition and results of operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Company’s interim consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q and with the consolidated financial statements and accompanying notes and other detailed information appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of our future financial outcomes. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management’s expectations. See the “Forward-Looking Statements” section of this discussion for further information on forward-looking statements.
Overview
We are a financial holding company headquartered in Dallas, Texas and registered under the Bank Holding Company Act, offering a diversified line of payments, factoring and banking services. As of September 30, 2024, we had consolidated total assets of $5.866 billion, total loans held for investment of $4.333 billion, total deposits of $4.707 billion and total stockholders’ equity of $885.8 million.
Through our wholly owned bank subsidiary, TBK Bank, we offer traditional banking services, commercial lending product lines focused on businesses that require specialized financial solutions and national lending product lines that further diversify our lending operations. Our banking operations commenced in 2010 and include a branch network developed through organic growth and acquisition, including concentrations the front range of Colorado, the Quad Cities market in Iowa and Illinois and a full-service branch in Dallas, Texas. Our traditional banking offerings include a full suite of lending and deposit products and services. These activities are focused on our local market areas and some products are offered on a nationwide basis. They generate a stable source of core deposits and a diverse asset base to support our overall operations. Our asset-based lending and equipment lending products are offered on a nationwide basis and generate attractive returns. Additionally, we offer mortgage warehouse and liquid credit lending products on a nationwide basis to provide further asset base diversification and stable deposits. Our Banking products and services share basic processes and have similar economic characteristics.
In addition to our traditional banking operations, we also operate a factoring business focused primarily on serving the over-the-road trucking industry. This business involves the provision of working capital to the trucking industry through the purchase of invoices generated by medium to large sized trucking fleets ("Carriers") at a discount to provide immediate working capital to such Carriers. We commenced these operations in 2012 through the acquisition of our factoring subsidiary, Triumph Financial Services. Triumph Financial Services operates in a highly specialized niche and earns substantially higher yields on its factored accounts receivable portfolio than our other lending products described above. Given its acquisition, this business has a legacy and structure as a standalone company.
Our payments business, TriumphPay, is a division of our wholly owned bank subsidiary, TBK Bank, and is a payments network for the over-the-road trucking industry. TriumphPay was originally designed as a platform to manage Carrier payments for third party logistics companies, or 3PLs ("Brokers") and the manufacturers and other businesses that contract directly for the shipment of goods (“Shippers”), with a focus on increasing on-balance sheet factored receivable transactions through the offering of quickpay transactions for Carriers receiving such payments through the TriumphPay platform. During 2021, TriumphPay acquired HubTran, Inc., a software platform that offers workflow solutions for the processing and approval of Carrier Invoices for approval by Brokers or purchase by the factoring businesses providing working capital to Carriers ("Factors"). Following such acquisition, the TriumphPay strategy shifted from a capital-intensive on-balance sheet product with a greater focus on interest income to a payments network for the trucking industry with a focus on fee revenue. TriumphPay connects Brokers, Shippers, Factors and Carriers through forward-thinking solutions that help each party successfully manage the life cycle of invoice presentment for services provided by Carrier through the processing and audit of such invoice to its ultimate payment to the Carrier or the Factor providing working capital to such Carrier. TriumphPay offers supply chain finance to Brokers, allowing them to pay their Carriers faster and drive Carrier loyalty. TriumphPay provides tools and services to increase automation, mitigate fraud, create back-office efficiency and improve the payment experience. TriumphPay also operates in a highly specialized niche with unique processes and key performance indicators.
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At September 30, 2024, our business is primarily focused on providing financial services to participants in the for-hire trucking ecosystem in the United States, including Brokers, Shippers, Factors and Carriers. Within such ecosystem, we operate our TriumphPay payments platform, which connects such parties to streamline and optimize the presentment, audit and payment of transportation invoices. We also act as capital provider to the Carrier industry through our factoring subsidiary, Triumph Financial Services. Our traditional banking operations provide stable, low cost deposits to support our operations, a diversified lending portfolio to add stability to our balance sheet, and a suite of traditional banking products and services to participants in the for-hire trucking ecosystem to deepen our relationship with such clients.
We have determined our reportable segments are Banking, Factoring, and Payments. For the nine months ended September 30, 2024, our Banking segment generated 61% of our total segment revenue (comprised of interest and noninterest income), our Factoring segment generated 30% of our total segment revenue, and our Payments segment generated 9% of our total segment revenue.
Third Quarter 2024 Overview
Net income available to common stockholders for the three months ended September 30, 2024 was $4.5 million, or $0.19 per diluted share, compared to net income to common stockholders for the three months ended September 30, 2023 of $12.0 million, or $0.51 per diluted share. For the three months ended September 30, 2024, our return on average common equity was 2.14% and our return on average assets was 0.36%.
Net income available to common stockholders for the nine months ended September 30, 2024 was $9.8 million, or $0.42 per diluted share, compared to net income available to common stockholders for the nine months ended September 30, 2023 of $29.1 million, or $1.23 per diluted share. For the nine months ended September 30, 2024, our return on average common equity was 1.57% and our return on average assets was 0.29%.
At September 30, 2024, we had total assets of $5.866 billion, including gross loans held for investment of $4.333 billion, compared to $5.347 billion of total assets and $4.163 billion of gross loans held for investment at December 31, 2023. Total loans held for investment increased $169.9 million during the nine months ended September 30, 2024. Our Banking loans, which constitute 72% of our total loan portfolio at September 30, 2024, increased from $3.046 billion in aggregate as of December 31, 2023 to $3.129 billion as of September 30, 2024, an increase of 2.7%. Our Factoring factored receivables, which constitute 24% of our total loan portfolio at September 30, 2024, increased from $941.9 million in aggregate as of December 31, 2023 to $1,031.6 million as of September 30, 2024, an increase of 9.5%. Our Payments factored receivables, which constitute 4% of our total loan portfolio at September 30, 2024, decreased from $174.7 million in aggregate as of December 31, 2023 to $169.9 million as of September 30, 2024, a decrease of 2.8%.
At September 30, 2024, we had total liabilities of $4.980 billion, including total deposits of $4.707 billion, compared to $4.483 billion of total liabilities and $3.977 billion of total deposits at December 31, 2023. Deposits increased $729.2 million during the nine months ended September 30, 2024.
At September 30, 2024, we had total stockholders' equity of $885.8 million. During the nine months ended September 30, 2024, total stockholders’ equity increased $21.4 million. Capital ratios remained strong with Tier 1 capital and total capital to risk weighted assets ratios of 13.57% and 16.62%, respectively, at September 30, 2024.
The total dollar value of invoices purchased by Triumph Financial Services during the three months ended September 30, 2024 was $2.610 billion with an average invoice size of $1,763. The average transportation invoice size for the three months ended September 30, 2024 was $1,724. This compares to invoice purchase volume of $2.606 billion with an average invoice size of $1,825 and average transportation invoice size of $1,772 during the same period a year ago.
TriumphPay processed 6.3 million invoices paying Carriers a total of $7.091 billion during the three months ended September 30, 2024. This compares to processed volume of 5.0 million invoices for a total of $5.330 billion during the same period a year ago.
2024 Items of Note
Triumph Financial Headquarters Purchase
On March 20, 2024, we purchased a building in Dallas, TX that will be the future headquarters for Triumph Financial. The purchase price, including direct costs, was $54.6 million with approximately $51.7 million allocated to land and building and $2.9 million allocated to lease-related intangibles.
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Items related to our July 2020 acquisition of TFS
As disclosed on our SEC Forms 8-K filed on July 8, 2020 and September 23, 2020, we acquired the transportation factoring assets of TFS, a wholly owned subsidiary of Covenant Logistics Group, Inc. ("CVLG"), and subsequently amended the terms of that transaction. There were no material developments related to that transaction that impacted our operating results for the three months ended September 30, 2024.
At September 30, 2024, the carrying value of the acquired over-formula advances was $1.9 million, the total reserve on acquired over-formula advances was $1.9 million and the balance of our indemnification asset, the value of the payment that would be due to us from CVLG in the event that these over-advances are charged off, was $0.9 million.
As of September 30, 2024 we carry a separate receivable (the “Misdirected Payments”) payable by the United States Postal Service (“USPS”) arising from accounts factored to the largest over-formula advance carrier. The balance of such Misdirected Payments, net of customer reserves, was $19.4 million at September 30, 2024. This amount is separate from the acquired Over-Formula Advances. The amounts represented by this receivable were paid by the USPS directly to such customer in contravention of notices of assignment delivered to, and previously honored by, the USPS, which amount was then not remitted back to us by such customer as required. The USPS disputes their obligation to make such payment, citing purported deficiencies in the notices delivered to them. We are a party to litigation in the United States Court of Federal Claims against the USPS seeking a ruling that the USPS was obligated to make the payments represented by this receivable directly to us. Based on our legal analysis and discussions with our counsel advising us on this matter, we continue to believe it is probable that we will prevail in such action and that the USPS will have the capacity to make payment on such receivable. Consequently, we have not reserved for such balance as of September 30, 2024. The full amount of such receivable is reflected in non-performing and past due factored receivables as of September 30, 2024 in accordance with our policy. As of September 30, 2024, the entire Misdirected Payments amount was greater than 90 days past due.
2023 Items of Note
Equity Investment
On June 22, 2023 we made a $9.7 million minority investment in Trax Group, Inc. ("Trax"), a leader in transportation spend management solutions. The investment in Trax is accounted for as an equity investment without a readily determinable fair value measured under the measurement alternative and is included in other assets on our consolidated balance sheet.
Accelerated Share Repurchase and Stock Repurchase Program
On February 1, 2023, we entered into an accelerated share repurchase (“ASR”) agreement to repurchase $70.0 million of our common stock. The ASR is part of our previously announced plan to repurchase up to $100.0 million of our common stock and is within the remaining amount authorized by our Board of Directors pursuant to such plan. During the three months ended March 31, 2023, we received an initial delivery of 961,373 common shares representing approximately 80% of the expected total to be repurchased. On April 28, 2023, the ASR was completed and we received an additional delivery of 247,954 common shares.
Trucking transportation and factoring
The largest driver of changes in revenue at our Factoring segment is fluctuation in the freight markets, particularly in brokered freight, which is priced largely off the spot market (a reflection of real-time balance of carrier supply and shipper demand in the market) and subject to variability in diesel prices. The softness in freight during 2023 was a combination of falling volumes and excess capacity and such softness has continued throughout 2024. In recent quarters, average rates per mile have decreased and returned spot rates to levels last seen in 2019. For the spot rate market, the drop was a little higher than the drop in diesel prices over the same period. Throughout much of 2023 and into 2024, spot rates had fallen below the cost per mile to operate for many carriers. As a result, we have observed a number of small and medium-sized trucking companies either leave the market by signing on with larger carriers or electing to sell their fleets or companies and move on to other endeavors albeit the pace of these exits has slowed recently. The confluence of these circumstances has resulted in a steady decline in invoice prices and costs of new and used equipment. Such invoice prices and costs of new and used equipment remained consistently below recent years throughout the latter half of 2023 and all of 2024.
Though the transportation factoring industry continues to fight headwinds due to higher cost of capital and lower average invoices, we have sufficient access to capital, manageable funding costs, and an ability to diversify factoring income. We continue to focus our efforts on technology initiatives to be more efficient, support the enterprise, and enhance our customer experience while delivering various products to strengthen our clients throughout their business lifecycle. Our plan is for managed growth in our factoring segment with a greater emphasis on enhancing efficiency and profitability.

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Financial Highlights
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands, except per share amounts)2024202320242023
Income Statement Data:
Interest income$108,075 $107,533 $317,037 $313,693 
Interest expense19,376 16,206 54,388 37,533 
Net interest income88,699 91,327 262,649 276,160 
Credit loss expense (benefit)4,263 812 14,314 6,068 
Net interest income after credit loss expense (benefit)84,436 90,515 248,335 270,092 
Noninterest income17,497 13,410 49,663 35,943 
Noninterest expense95,646 86,259 283,360 265,936 
Net income (loss) before income taxes6,287 17,666 14,638 40,099 
Income tax expense (benefit)940 4,872 2,386 8,645 
Net income (loss)$5,347 $12,794 $12,252 $31,454 
Dividends on preferred stock(801)(801)(2,404)(2,404)
Net income available (loss) to common stockholders$4,546 $11,993 $9,848 $29,050 
Per Share Data:
Basic earnings (loss) per common share$0.19 $0.52 $0.42 $1.25 
Diluted earnings (loss) per common share$0.19 $0.51 $0.42 $1.23 
Weighted average shares outstanding - basic23,330,635 23,162,614 23,268,887 23,220,331 
Weighted average shares outstanding - diluted23,725,324 23,458,914 23,673,963 23,572,429 
Performance ratios - Annualized:
Return on average assets0.36 %0.93 %0.29 %0.78 %
Return on average total equity2.39 %5.95 %1.85 %4.94 %
Return on average common equity2.14 %5.89 %1.57 %4.82 %
Return on average tangible common equity (1)
3.07 %8.70 %2.26 %7.16 %
Yield on loans(2)
8.85 %9.16 %9.01 %9.17 %
Cost of interest bearing deposits2.20 %1.83 %2.18 %1.21 %
Cost of total deposits1.23 %1.15 %1.26 %0.73 %
Cost of total funds1.57 %1.41 %1.55 %1.12 %
Net interest margin(2)
6.81 %7.48 %7.05 %7.70 %
Efficiency ratio90.06 %82.36 %90.73 %85.21 %
Net noninterest expense to average assets5.29 %5.28 %5.52 %5.68 %
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(Dollars in thousands, except per share amounts)September 30,
2024		December 31,
2023
Balance Sheet Data:
Total assets$5,866,046 $5,347,334 
Cash and cash equivalents489,280 286,635 
Investment securities409,890 307,109 
Loans held for investment, net4,291,724 4,127,881 
Total liabilities4,980,282 4,482,934 
Noninterest bearing deposits2,103,092 1,632,022 
Interest bearing deposits2,603,602 2,345,456 
FHLB advances30,000 255,000 
Subordinated notes109,072 108,678 
Junior subordinated debentures42,196 41,740 
Total stockholders’ equity885,764 864,400 
Preferred stockholders' equity45,000 45,000 
Common stockholders' equity840,764 819,400 
Per Share Data:
Book value per share$35.95 $35.16 
Tangible book value per share (1)
$25.22 $24.12 
Shares outstanding end of period23,387,522 23,302,414 
Asset Quality ratios(3):
Past due to total loans2.62 %2.00 %
Nonperforming loans to total loans2.62 %1.65 %
Nonperforming assets to total assets2.07 %1.42 %
ACL to nonperforming loans36.28 %51.15 %
ACL to total loans0.95 %0.85 %
Net charge-offs to average loans(4)
0.20 %0.47 %
Capital ratios:
Tier 1 capital to average assets12.21 %12.64 %
Tier 1 capital to risk-weighted assets13.57 %13.74 %
Common equity Tier 1 capital to risk-weighted assets11.85 %11.94 %
Total capital to risk-weighted assets16.62 %16.75 %
Total stockholders' equity to total assets15.10 %16.17 %
Tangible common stockholders' equity ratio (1)
10.50 %11.04 %
(1)The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. The non-GAAP measures used by the Company include the following:
•"Tangible common stockholders' equity" is defined as common stockholders' equity less goodwill and other intangible assets.
•“Total tangible assets” is defined as total assets less goodwill and other intangible assets.
•“Tangible book value per share” is defined as tangible common stockholders’ equity divided by total common shares outstanding. This measure is important to investors interested in changes from period-to-period in book value per share exclusive of changes in intangible assets.
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•“Tangible common stockholders’ equity ratio” is defined as the ratio of tangible common stockholders’ equity divided by total tangible assets. We believe that this measure is important to many investors in the marketplace who are interested in relative changes from period-to period in common equity and total assets, each exclusive of changes in intangible assets.
•“Return on average tangible common equity” is defined as net income available to common stockholders divided by average tangible common stockholders’ equity.
(2)Performance ratios include discount accretion on purchased loans for the periods presented as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands, except per share amounts)2024202320242023
Loan discount accretion$893 $1,403 $2,491 $4,203 
(3)Asset quality ratios exclude loans held for sale, except for non-performing assets to total assets.
(4)Net charge-offs to average loans ratios are for the nine months ended September 30, 2024 and the year ended December 31, 2023.
GAAP Reconciliation of Non-GAAP Financial Measures
We believe the non-GAAP financial measures included above provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. The following reconciliation table provides a more detailed analysis of the non-GAAP financial measures:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands, except per share amounts)2024202320242023
Average total stockholders' equity$888,435 $853,375 $882,849 $851,139 
Average preferred stock liquidation preference(45,000)(45,000)(45,000)(45,000)
Average total common stockholders' equity843,435 808,375 837,849 806,139 
Average goodwill and other intangibles(253,656)(261,619)(255,431)(263,814)
Average tangible common equity$589,779 $546,756 $582,418 $542,325 
Net income available to common stockholders$4,546 $11,993 $9,848 $29,050 
Average tangible common equity589,779 546,756 582,418 542,325 
Return on average tangible common equity3.07 %8.70 %2.26 %7.16 %
Efficiency ratio:
Net interest income$88,699 $91,327 $262,649 $276,160 
Noninterest income17,497 13,410 49,663 35,943 
Operating revenue106,196 104,737 312,312 312,103 
Total noninterest expense$95,646 $86,259 $283,360 $265,936 
Efficiency ratio90.06 %82.36 %90.73 %85.21 %
Net noninterest expense to average assets ratio:
Total noninterest expense$95,646 $86,259 $283,360 $265,936 
Total noninterest income17,497 13,410 49,663 35,943 
Net noninterest expenses$78,149 $72,849 $233,697 $229,993 
Average total assets$5,871,903 $5,472,000 $5,654,804 $5,415,269 
Net noninterest expense to average assets ratio5.29 %5.28 %5.52 %5.68 %
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(Dollars in thousands, except per share amounts)September 30,
2024		December 31,
2023
Total stockholders' equity$885,764 $864,400 
Preferred stock(45,000)(45,000)
Total common stockholders' equity840,764 819,400 
Goodwill and other intangibles(251,025)(257,355)
Tangible common stockholders' equity$589,739 $562,045 
Common shares outstanding23,387,522 23,302,414 
Tangible book value per share$25.22 $24.12 
Total assets at end of period$5,866,046 $5,347,334 
Goodwill and other intangibles(251,025)(257,355)
Tangible assets at period end$5,615,021 $5,089,979 
Tangible common stockholders' equity ratio10.50 %11.04 %
Results of Operations
Three months ended September 30, 2024 compared with three months ended September 30, 2023.
Net Income
We earned net income of $5.3 million for the three months ended September 30, 2024 compared to net income of $12.8 million for the three months ended September 30, 2023, a decrease of $7.5 million or 58.2%.
Three Months Ended September 30, 2024
(Dollars in thousands, except per share amounts)20242023$ Change% Change
Interest income$108,075 $107,533 $542 0.5 %
Interest expense19,376 16,206 3,170 19.6 %
Net interest income88,699 91,327 (2,628)(2.9)%
Credit loss expense (benefit)4,263 812 3,451 425.0 %
Net interest income after credit loss expense (benefit)84,436 90,515 (6,079)(6.7)%
Noninterest income17,497 13,410 4,087 30.5 %
Noninterest expense95,646 86,259 9,387 10.9 %
Net income (loss) before income taxes6,287 17,666 (11,379)(64.4)%
Income tax expense (benefit)940 4,872 (3,932)(80.7)%
Net income (loss)$5,347 $12,794 $(7,447)(58.2)%
Details of the changes in the various components of net income are further discussed below.
Net Interest Income
Our operating results depend primarily on our net interest income, which is the difference between interest income on interest earning assets, including loans and securities, and interest expense incurred on interest bearing liabilities, including deposits and other borrowed funds. Interest rate fluctuations, as well as changes in the amount and type of interest earning assets and interest bearing liabilities, combine to affect net interest income. Our net interest income is affected by changes in the amount and mix of interest earning assets and interest bearing liabilities, referred to as a “volume change.” It is also affected by changes in yields earned on interest earning assets and rates paid on interest bearing liabilities, referred to as a “rate change.”
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The following table presents the distribution of average assets, liabilities and equity, as well as interest income and fees earned on average interest earning assets and interest expense paid on average interest bearing liabilities. Average balances and interest are inclusive of assets and deposits classified as held for sale.
Three Months Ended September 30,
20242023
(Dollars in thousands)Average
Balance		Interest
Average
Rate(4)
Average
Balance		Interest
Average
Rate(4)
Interest earning assets:
Cash and cash equivalents563,683 7,712 5.44 %228,019 3,101 5.40 %
Taxable securities398,265 6,479 6.47 %305,665 5,173 6.71 %
Tax-exempt securities3,129 21 2.67 %4,901 32 2.59 %
FHLB and other restricted stock13,587 379 11.10 %19,552 397 8.06 %
Loans (1)
4,200,306 93,484 8.85 %4,282,822 98,830 9.16 %
Total interest earning assets5,178,970 108,075 8.30 %4,840,959 107,533 8.81 %
Noninterest earning assets:
Cash and cash equivalents73,924 78,655 
Other noninterest earning assets619,009 552,386 
Total assets5,871,903 5,472,000 
Interest bearing liabilities:
Deposits:
Interest bearing demand721,482 987 0.54 %776,812 769 0.39 %
Individual retirement accounts47,397 158 1.33 %56,265 134 0.94 %
Money market580,281 4,128 2.83 %542,243 2,706 1.98 %
Savings538,367 1,609 1.19 %537,980 723 0.53 %
Certificates of deposit248,126 2,087 3.35 %270,535 1,256 1.84 %
Brokered time deposits404,537 5,072 4.99 %501,221 6,717 5.32 %
Other brokered deposits— — — %12,231 169 5.48 %
Total interest bearing deposits2,540,190 14,041 2.20 %2,697,287 12,474 1.83 %
Federal Home Loan Bank advances213,424 2,936 5.47 %91,957 1,248 5.38 %
Subordinated notes108,984 1,227 4.48 %108,336 1,315 4.82 %
Junior subordinated debentures42,105 1,172 11.07 %41,520 1,169 11.17 %
Other borrowings11 — — %— — — %
Total interest bearing liabilities2,904,714 19,376 2.65 %2,939,100 16,206 2.19 %
Noninterest bearing liabilities and equity:
Noninterest bearing demand deposits1,991,042 1,615,697 
Other liabilities87,712 63,828 
Total equity888,435 853,375 
Total liabilities and equity5,871,903 5,472,000 
Net interest income88,699 91,327 
Interest spread (2)
5.65 %6.62 %
Net interest margin (3)
6.81 %7.48 %
(1)Balance totals include respective nonaccrual assets.
(2)Net interest spread is the yield on average interest earning assets less the rate on interest bearing liabilities.
(3)Net interest margin is the ratio of net interest income to average interest earning assets.
(4)Ratios have been annualized.
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The following table presents loan yields earned on our loan portfolios:
Three Months Ended September 30,
20242023
(Dollars in thousands)Average BalanceInterestAverage RateAverage BalanceInterestAverage Rate
Banking loans$3,008,767 $52,886 6.99 %$3,109,630 $59,669 7.61 %
Factoring receivables1,023,570 34,905 13.57 %999,345 34,244 13.59 %
Payments receivables167,969 5,693 13.48 %173,847 4,917 11.22 %
Total loans$4,200,306 $93,484 8.85 %$4,282,822 $98,830 9.16 %
We earned net interest income of $88.7 million for the three months ended September 30, 2024 compared to $91.3 million for the three months ended September 30, 2023, a decrease of $2.6 million, or 2.8%, primarily driven by the following factors.
Interest income increased $0.5 million, or 0.5%, due to changes in average interest earning assets which increased $338.0 million, or 7.0%, including an increase of $335.7 million in average cash and cash equivalents. That said, we experienced a decrease in average total loans of $82.5 million, or 1.9%. The average balance of our higher yielding Factoring factored receivables increased $24.2 million, or 2.4%, while we experienced a decrease in average Payments factored receivables. Average Banking loans decreased $100.9 million, or 3.2% due to decreases in the average balances of commercial real estate, residential real estate, farmland, commercial, and consumer loans. Interest income from our Banking loans is impacted by our lower yielding mortgage warehouse lending product. The average mortgage warehouse lending balance was $762.7 million for the three months ended September 30, 2024 compared to $757.6 million for the three months ended September 30, 2023. A component of interest income consists of discount accretion on acquired loan portfolios and acquired liquid credit loans. We recognized discount accretion on purchased loans of $0.9 million and $1.4 million for the three months ended September 30, 2024 and 2023, respectively.
Interest expense increased $3.2 million, or 19.6%, primarily driven by higher average rates. Average interest-bearing liabilities decreased in total period over period, including average total interest bearing deposits which decreased $157.1 million, or 5.8%. Average noninterest bearing demand deposits grew $375.3 million.
Net interest margin decreased to 6.81% for the three months ended September 30, 2024 from 7.48% for the three months ended September 30, 2023, a decrease of 67 basis points or 9.0%.
The decrease in our net interest margin was most impacted by a decrease in our yield on interest earning assets of 51 basis points to 8.30% for the three months ended September 30, 2024. This decrease was primarily driven by lower yields on loans which decreased 31 basis points to 8.85% for the period. Yield on our Banking loans decreased 62 basis points period over period driving much of the decrease in the yield on our overall loan portfolio. Our yield on Factoring factored receivables was relatively flat period over period as was our average Factoring factored receivables as a percentage of the total average loan portfolio. Our transportation factoring balances, which generally generate a higher yield than our non-transportation factoring balances, were 97% and 96% of our Factoring portfolio at September 30, 2024 and 2023, respectively. Payments yield increased period over period. Non-loan yields were higher across the board period over period with the exception of yield on taxable securities.
The decrease in our net interest margin was also impacted by an increase in our average cost of interest bearing liabilities of 46 basis points. This increase in average cost was caused by generally higher interest rates paid on our interest-bearing liabilities driven by changes in interest rates paid on such deposits in the macro economy.
Our mortgage warehouse business has nearly self-funded for several quarters due to the servicing deposits of its customers. The average balance of such deposits was $656.2 million for the three months ended September 30, 2024. These deposits are noninterest bearing deposits on our balance sheet. Despite their classification, many of these deposits are not truly free of cost as our clients are compensated for these balances in the form of an earnings interest rebate rather than deposit interest. As a result, such noninterest bearing deposits decrease our loan yield rather than increase our deposit rates. It is important to note that our net interest margin is not affected by this arrangement. During the third quarter of 2024, these deposits decreased our overall yield on loans by 71 bps and our overall cost of deposits and cost of funds would have been 66 bps and 61 bps higher, respectively.


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The following table shows the effects that changes in average balances (volume) and average interest rates (rate) had on the interest earned on our interest earning assets and the interest incurred on our interest bearing:
Three Months Ended
September 30, 2024 vs. 2023
Increase (Decrease) Due to:
(Dollars in thousands)RateVolumeNet Increase
Interest earning assets:
Cash and cash equivalents$19 $4,592 $4,611 
Taxable securities(200)1,506 1,306 
Tax-exempt securities1 (12)(11)
FHLB and other restricted stock148 (166)(18)
Loans(3,509)(1,837)(5,346)
Total interest income(3,541)4,083 542 
Interest bearing liabilities:
Interest bearing demand294 (76)218 
Individual retirement accounts54 (30)24 
Money market1,151 271 1,422 
Savings885 1 886 
Certificates of deposit1,019 (188)831 
Brokered time deposits(433)(1,212)(1,645)
Other brokered deposits— (169)(169)
Total interest bearing deposits2,970 (1,403)1,567 
Federal Home Loan Bank advances17 1,671 1,688 
Subordinated notes(95)7 (88)
Junior subordinated debentures(13)16 3 
Other borrowings— — — 
Total interest expense2,879 291 3,170 
Change in net interest income$(6,420)$3,792 $(2,628)
Credit Loss Expense
Credit loss expense is the amount of expense that, based on our judgment, is required to maintain the allowances for credit losses (“ACL”) at an appropriate level under the current expected credit loss model. The determination of the amount of the allowance is complex and involves a high degree of judgment and subjectivity. Refer to Note 1 of the Company’s 2023 Form 10-K for detailed discussion regarding ACL methodologies for available for sale debt securities, held to maturity securities and loans held for investment.
The following table presents the major categories of credit loss expense:
Three Months Ended September 30,
(Dollars in thousands)20242023$ Change% Change
Credit loss expense (benefit) on loans$5,174 $1,051 $4,123 392.3 %
Credit loss expense (benefit) on off balance sheet credit exposures(1,132)(253)(879)(347.4)%
Credit loss expense (benefit) on held to maturity securities221 14 207 1,478.6 %
Credit loss expense on available for sale securities— — — — 
Total credit loss expense (benefit)$4,263 $812 $3,451 425.0 %
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For available for sale debt securities in an unrealized loss position, the Company evaluates the securities at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an ACL on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings via credit loss expense. At September 30, 2024 and June 30, 2024, the Company determined that all impaired available for sale securities experienced a decline in fair value below the amortized cost basis due to noncredit-related factors. Therefore, the Company carried no ACL at those respective dates and there was no credit loss expense recognized by the Company during the three months ended September 30, 2024. The same was true for the same period in the prior year.
The ACL on held to maturity ("HTM") securities is estimated at each measurement date on a collective basis by major security type. At September 30, 2024 and December 31, 2023, the Company’s held to maturity securities consisted of three investments in the subordinated notes of collateralized loan obligation (“CLO”) funds. Expected credit losses for these securities are estimated using a discounted cash flow methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. At September 30, 2024 and June 30, 2024, the Company carried $5.5 million and $5.9 million, respectively, of these HTM securities at amortized cost. The required ACL on these balances was $3.4 million at September 30, 2024 and $3.2 million at June 30, 2024, resulting in $0.2 million of credit loss expense during the current quarter. Credit loss expense during the three months ended September 30, 2023 was $14 thousand. None of the overcollateralization triggers tied to the CLO securities were tripped as of September 30, 2024. Ultimately, the realized cash flows on CLO securities such as these will be driven by a variety of factors, including credit performance of the underlying loan portfolio, adjustments to the portfolio by the asset manager, and the timing of a potential call.
Our ACL on loans was $41.2 million as of September 30, 2024, compared to $35.2 million as of December 31, 2023, representing an ACL to total loans ratio of 0.95% and 0.85%, respectively.
Our credit loss expense on loans increased $4.1 million, or 392.3%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
The increase in credit loss expense was primarily driven by changes in required specific reserves. Such specific reserves increased $2.2 million during the three months ended September 30, 2024 compared to a decrease of $0.7 million during the same period a year ago. Changes to projected loss drivers and prepayment speeds that the Company forecasted over the reasonable and supportable forecast periods to calculate expected losses resulted in credit loss expense of $0.5 million during the three months ended September 30, 2024 compared to $0.2 million of credit loss expense during the same period a year ago.
The increase in credit loss expense was also driven by net charge-off activity during the period. Net charge-offs during the three months ended September 30, 2024 were $3.5 million compared to $1.2 million during the same period a year ago. Approximately $2.0 million of the $3.5 million net charge-offs for the three months ended September 30, 2024 were reserved in a prior period while approximately $1.4 million of the $1.2 million net charge-offs for the three months ended September 30, 2023 were reserved in a prior period. Such prior period reserves are included in the discussion of changes in specific reserves above.
The increase in credit loss expense was partially offset by changes in volume and mix of the loan portfolio which drove a decrease in credit loss expense period over period. Such changes resulted in a benefit to credit loss expense of $1.1 million during the three months ended September 30, 2024 compared to credit loss expense of $0.4 million during the same period a year ago.
Credit loss expense for off balance sheet credit exposures decreased $0.9 million, primarily due to changes to outstanding commitments to fund and changes to assumed loss rates period over period.
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Noninterest Income
The following table presents our major categories of noninterest income:
Three Months Ended September 30,
(Dollars in thousands)20242023$ Change% Change
Service charges on deposits$1,865 $1,728 $137 7.9 %
Card income2,135 2,065 70 3.4 %
Net gains (losses) on sale or call of securities— 5 (5)(100.0)%
Net gains (losses) on sale of loans253 203 50 24.6 %
Fee income9,129 8,108 1,021 12.6 %
Insurance commissions1,472 1,074 398 37.1 %
Other2,643 227 2,416 1,064.3 %
Total noninterest income$17,497 $13,410 $4,087 30.5 %
Noninterest income increased $4.1 million, or 30.5%. Changes in selected components of noninterest income in the above table are discussed below.
•Fee income. Fee income increased $1.0 million, or 12.6%, due to a $1.4 million increase in fees earned by our Payments segment during the three months ended September 30, 2024 compared to the same period a year ago.
•Insurance commissions. Insurance commissions increased $0.4 million due to higher volumes of processed policies.
•Other. Other noninterest income increased $2.4 million partially due to a gain on our revenue share asset of $0.4 million during the three months ended September 30, 2024 compared to a loss of $0.1 million during the same period a year ago. We also recognized $1.4 million of rental income on the building we acquired during March of 2024.
Noninterest Expense
The following table presents our major categories of noninterest expense:
Three Months Ended September 30,
(Dollars in thousands)20242023$ Change% Change
Salaries and employee benefits$55,447 $50,884 $4,563 9.0 %
Occupancy, furniture and equipment8,701 7,542 1,159 15.4 %
FDIC insurance and other regulatory assessments679 682 (3)(0.4)%
Professional fees4,734 3,941 793 20.1 %
Amortization of intangible assets3,600 2,849 751 26.4 %
Advertising and promotion1,416 1,839 (423)(23.0)%
Communications and technology12,422 10,784 1,638 15.2 %
Software amortization1,484 1,024 460 44.9 %
Travel and entertainment1,431 1,074 357 33.2 %
Other5,732 5,640 92 1.6 %
Total noninterest expense$95,646 $86,259 $9,387 10.9 %
Noninterest expense increased $9.4 million, or 10.9%. Details of the more significant changes in the various components of noninterest expense are further discussed below.
•Salaries and Employee Benefits. Salaries and employee benefits expenses increased $4.6 million, or 9.0%. Employee salaries and payroll taxes increased $3.0 million and $0.1 million, respectively. The size of our workforce increased period over period due to organic growth within the Company. Our average full-time equivalent employees were 1,542.3 and 1,470.0 for the three months ended September 30, 2024 and 2023, respectively. Temporary labor expense increased $1.0 million and commissions expense increased $0.2 million period over period. Additionally, employee benefits expense such as 401(k) benefits match, employee insurance and stock based compensation increased $1.0 million. These increases were partially offset by a decrease in bonus expense of $0.7 million.
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•Occupancy, Furniture and Equipment. Occupancy, furniture and equipment expenses increased $1.2 million, or 15.4%, primarily due to $1.0 million of expense related to the building we acquired during March of 2024. The additional increase is driven by growth in our operations period over period.
•Professional Fees. Professional fees increased $0.8 million, or 20.1%, primarily due to a $0.6 million increase in legal and consulting fees period over period.
•Amortization of Intangible Assets. Amortization of intangible assets increased $0.8 million, or 26.4%, primarily due to additional amortization resulting from the intangible assets related to the building we acquired during March of 2024.
•Advertising and Promotion. Advertising and promotion decreased $0.4 million, or 23.0%, primarily due to expense control measures in this area of spending.
•Communication and Technology. Communication and technology increased $1.6 million, or 15.2%, primarily as a result of increased spending on IT infrastructure, information security, and initiatives designed to develop efficiency in our operations period over period.
•Software Amortization. Software amortization expense increased $0.5 million, or 44.9%, primarily due to additional software assets coming on line during 2024.
•Travel and Entertainment. Travel and entertainment expense increased $0.4 million, or 33.2%, primarily due to additional travel period over period.
•Other. Other noninterest expense includes loan-related expenses, training and recruiting, postage, insurance, and subscription services. Other noninterest expense increased $0.1 million, or 1.6%. There were no significant variances in other noninterest expense period over period.
Income Taxes
The amount of income tax expense is influenced by the amount of pre-tax income, the amount of tax-exempt income and the effect of changes in valuation allowances maintained against deferred tax benefits.
Income tax expense decreased $4.0 million, from $4.9 million for the three months ended September 30, 2023 to $0.9 million for the three months ended September 30, 2024. The effective tax rate was 15% for the three months ended September 30, 2024, compared to 28% for the three months ended September 30, 2023. The reduction in income tax expense and the corresponding effective tax rates was driven by a $0.9 million research and development tax credit recognized during the three months ended September 30, 2024.
Operating Segment Results
Our reportable segments are Banking, Factoring, and Payments which have been determined based upon their business processes and economic characteristics. This determination also gave consideration to the structure and management of various product lines. The Banking segment includes the operations of TBK Bank. Our Banking segment derives its revenue principally from investments in interest earning assets as well as noninterest income typical for the banking industry. The Factoring segment includes the operations of Triumph Financial Services with revenue derived from factoring services. The Payments segment includes the operations of TBK Bank's TriumphPay division, which provides a presentment, audit, and payment solution to Shipper, Broker, and Factor clients in the trucking industry. The Payments segment derives its revenue from transaction fees and interest income on factored receivables related to invoice payments. These factored receivables consist of both invoices where we offer a Carrier a quickpay opportunity to receive payment at a discount in advance of the standard payment term for such invoice in exchange for the assignment of such invoice to us and from offering Brokers the ability to settle their invoices with us on an extended term following our payment to their Carriers as an additional liquidity option for such Brokers.
Prior to September 30, 2024, the Company disclosed Corporate as a reportable segment. The Company has determined that what was previously deemed the Corporate reportable segment consists of other business activities that do not represent a reportable segment, but rather, such activities belong in a Corporate and Other category as reported in the tabular disclosure below. It should be noted that such restructuring of the tabular disclosure did not result in any changes to the Company's revenue and expense allocation methodology described below. The Company restructured prior period tabular disclosures to achieve appropriate comparability.
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Expenses that are directly attributable to the Company's Banking, Factoring, and Payments segments such as, but not limited to, occupancy, salaries and benefits to employees that are fully dedicated to the segment, and certain technology costs that can be attributed to specific users or functional areas within the segment are allocated as such. The Company continues to make considerable investments in shared services that benefit the entire organization and these expenses are allocated to the Corporate and Other category. The Company allocates such expenses to the Corporate and Other category in order for the Company's chief operating decision maker and investors to have clear visibility into the operating performance of each reportable segment.
We allocate intersegment interest expense to the Factoring and Payments segments based on one-month term SOFR for their funding needs. When the Payments segment is self-funded, with customer deposit funding in excess of its factored receivables, intersegment interest income is allocated based on the Federal Funds effective rate. Management believes that such intersegment interest allocations appropriately reflect the current interest rate environment.
Reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data. With the exception of the Corporate and Other discussion above, the accounting policies of the segments are substantially the same as those described in the “Summary of Significant Accounting Policies” in Note 1 of the Company’s 2023 Form 10-K.
Transactions between segments consist primarily of borrowed funds, payment network fees, and servicing fees. Intersegment interest expense is allocated to the Factoring and Payments segments as described above. Payment network fees are paid by the Factoring segment to the Payments segment for use of the payments network. Beginning prospectively on June 1, 2023, factoring transactions with freight broker clients were transferred from our Factoring segment to our Payments segment to align with TriumphPay's supply chain finance product offerings. Servicing fees are paid by the Payments segment to the Factoring segment for servicing such product. Beginning prospectively on January 1, 2024, the Factoring and Payments segments began paying fees to our Banking segment for the Banking segment's execution of various banking services that benefit those segments. Credit loss expense is allocated based on the segment’s ACL determination. Noninterest income and expense directly attributable to a segment are assigned to it with various shared service costs such as human resources, accounting, finance, risk management and information technology expense assigned to the Corporate and Other category if they are not directly attributable to a segment. Taxes are paid on a consolidated basis and are not allocated for segment purposes.
The following tables present our primary operating results for our operating segments:
(Dollars in thousands)TotalCorporate
Three Months Ended September 30, 2024BankingFactoringPaymentsSegments
and Other(1)
Consolidated
Total interest income$67,390 $34,905 $5,693 $107,988 $87 $108,075 
Intersegment interest allocations6,711 (9,280)2,569 — — — 
Total interest expense16,976 — — 16,976 2,400 19,376 
Net interest income (expense)57,125 25,625 8,262 91,012 (2,313)88,699 
Credit loss expense (benefit)3,719 328 (5)4,042 221 4,263 
Net interest income after credit loss expense 53,406 25,297 8,267 86,970 (2,534)84,436 
Noninterest income7,538 2,170 6,322 16,030 1,467 17,497 
Noninterest expense32,009 19,969 16,598 68,576 27,070 95,646 
Net intersegment noninterest income (expense)(2)
139 465 (604)— — — 
Net income (loss) before income tax expense$29,074 $7,963 $(2,613)$34,424 $(28,137)$6,287 
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(Dollars in thousands)TotalCorporate
Three Months Ended September 30, 2023BankingFactoringPaymentsSegments
and Other(1)
Consolidated
Total interest income$68,328 $34,244 $4,917 $107,489 $44 $107,533 
Intersegment interest allocations8,330 (9,664)1,334 — — — 
Total interest expense13,723 — — 13,723 2,483 16,206 
Net interest income (expense)62,935 24,580 6,251 93,766 (2,439)91,327 
Credit loss expense (benefit)410 375 14 799 13 812 
Net interest income after credit loss expense 62,525 24,205 6,237 92,967 (2,452)90,515 
Noninterest income5,978 2,546 4,817 13,341 69 13,410 
Noninterest expense31,503 18,371 14,556 64,430 21,829 86,259 
Net intersegment noninterest income (expense)(2)
— 242 (242)— — — 
Net income (loss) before income tax expense$37,000 $8,622 $(3,744)$41,878 $(24,212)$17,666 
(1) Includes revenue and expense from the Company’s holding company, which does not meet the definition of an operating segment. Also includes corporate shared service costs such as the majority of salaries and benefits expense for our executive leadership team, as well as other selling, general, and administrative shared services costs including human resources, accounting, finance, risk management and a significant amount of information technology expense.
(2) Net intersegment noninterest income (expense) includes:
(Dollars in thousands)BankingFactoringPayments
Three Months Ended September 30, 2024
Factoring revenue received from Payments$— $864 $(864)
Payments revenue received from Factoring— (289)289 
Banking revenue received from Payments and Factoring139 (110)(29)
Net intersegment noninterest income (expense)$139 $465 $(604)
Three Months Ended September 30, 2023
Factoring revenue received from Payments$— $510 $(510)
Payments revenue received from Factoring— (268)268 
Banking revenue received from Payments and Factoring— — — 
Net intersegment noninterest income (expense)$— $242 $(242)
(Dollars in thousands)TotalCorporate
September 30, 2024BankingFactoringPaymentsSegmentsand OtherEliminationsConsolidated
Total assets$5,357,731 $1,165,591 $526,467 $7,049,789 $1,151,899 $(2,335,642)$5,866,046 
Gross loans$3,716,900 $1,033,783 $169,862 $4,920,545 $— $(587,578)$4,332,967 
(Dollars in thousands)TotalCorporate
December 31, 2023BankingFactoringPaymentsSegmentsand OtherEliminationsConsolidated
Total assets$4,918,527 $1,077,367 $546,985 $6,542,879 $1,056,646 $(2,252,191)$5,347,334 
Gross loans$3,595,527 $941,926 $174,728 $4,712,181 $— $(549,081)$4,163,100 
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Banking
(Dollars in thousands)Three Months Ended September 30,
Banking20242023$ Change% Change
Total interest income$67,390 $68,328 $(938)(1.4)%
Intersegment interest allocations6,711 8,330 (1,619)(19.4)%
Total interest expense16,976 13,723 3,253 23.7 %
Net interest income (expense)57,125 62,935 (5,810)(9.2)%
Credit loss expense (benefit)3,719 410 3,309 807.1 %
Net interest income after credit loss expense53,406 62,525 (9,119)(14.6)%
Noninterest income7,538 5,978 1,560 26.1 %
Noninterest expense32,009 31,503 506 1.6 %
Net intersegment noninterest income (expense)139 — 139 100.0 %
Operating income (loss)$29,074 $37,000 $(7,926)(21.4)%
Our Banking segment’s operating income decreased $7.9 million, or 21.4%.
Total interest income decreased $0.9 million, or 1.4%, at our Banking segment primarily as a result of decreased yields and average balances on loans at our Banking segment. More specifically, average loans in our Banking segment, excluding intersegment loans, decreased 3.2% from $3.110 billion for the three months ended September 30, 2023 to $3.009 billion for the three months ended September 30, 2024. The decrease was partially offset by increased yield and average balance of our non-loan interest earning assets. Intersegment interest income allocated to our Banking segment decreased period over period due to increased funding provided by our Payments segment resulting in increased intersegment interest allocation to such segment.
Interest expense increased $3.3 million, or 23.7%, primarily due to higher average rates paid on our interest-bearing liabilities driven by changes in interest rates in the macro economy. The increase was partially offset by a decrease in average interest-bearing liabilities at our Banking segment, including a decrease in average total interest bearing deposits of $157.1 million, or 5.8%, period over period. This increase was also driven by higher interest rates paid on our interest-bearing liabilities driven by changes in interest rates in the macro economy.
Credit loss expense at our Banking segment is made up of credit loss expense related to loans and credit loss expense related to off balance sheet commitments to lend. Credit loss expense related to loans was $4.0 million for the three months ended September 30, 2024 compared to credit loss expense on loans of $0.7 million for the three months ended September 30, 2023. The increase in credit loss expense was the result of increased net charge-offs at our Banking segment period over period, increases in specific reserves period over period, and changes to the projected loss drivers and prepayment speeds that the Company forecasted over the reasonable and supportable forecast periods. The increase was partially offset by a decrease driven by changes in the volume and mix of our Banking segment's loan portfolio period over period.
Credit loss expense for off balance sheet credit exposures was a benefit of $0.3 million during the three months ended September 30, 2024 and 2023.
Noninterest income at our Banking segment increased period over period due to a $0.4 million increase in fee income and a $0.4 million increase in insurance commissions period over period. There were no other significant changes in the components of noninterest income at our Banking segment period over period.
Noninterest expense at our Banking segment increased slightly period over period primarily due to a $0.6 million increase on communications and technology expense. There were no other significant changes in the components of noninterest expense at our Banking segment period over period.
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Year to date, our aggregate outstanding balances for our banking products, excluding intercompany loans, has increased $82.9 million, or 2.7%, to $3.129 billion as of September 30, 2024. The following table sets forth our banking loans:
(Dollars in thousands)September 30,
2024		December 31,
2023		$ Change% Change
Banking
Commercial real estate$762,343 $812,704 $(50,361)(6.2)%
Construction, land development, land217,148 136,720 80,428 58.8 %
1-4 family residential126,103 125,916 187 0.1 %
Farmland57,621 63,568 (5,947)(9.4)%
Commercial - General284,989 303,332 (18,343)(6.0)%
Commercial - Agriculture52,997 47,059 5,938 12.6 %
Commercial - Equipment488,326 460,008 28,318 6.2 %
Commercial - Asset-based lending205,476 246,065 (40,589)(16.5)%
Commercial - Liquid Credit59,539 113,901 (54,362)(47.7)%
Consumer6,990 8,326 (1,336)(16.0)%
Mortgage Warehouse867,790 728,847 138,943 19.1 %
Total banking loans$3,129,322 $3,046,446 $82,876 2.7 %
Factoring
(Dollars in thousands)Three Months Ended September 30,
Factoring20242023$ Change% Change
Total interest income$34,905 $34,244 $661 1.9 %
Intersegment interest allocations(9,280)(9,664)384 4.0 %
Total interest expense— — — — 
Net interest income (expense)25,625 24,580 1,045 4.3 %
Credit loss expense (benefit)328 375 (47)(12.5)%
Net interest income (expense) after credit loss expense25,297 24,205 1,092 4.5 %
Noninterest income2,170 2,546 (376)(14.8)%
Noninterest expense19,969 18,371 1,598 8.7 %
Net intersegment noninterest income (expense)465 242 223 92.1 %
Net income (loss) before income tax expense$7,963 $8,622 $(659)(7.6)%
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Three Months Ended September 30,
20242023
Factored receivable period end balance$1,031,633,000 $1,041,448,000 
Commercial loans period end balance$2,150,000 $— 
Yield on average receivable balance13.57 %13.59 %
Current quarter charge-off rate0.07 %0.12 %
Factored receivables - transportation concentration97 %96 %
Interest income, including fees$34,905,000 $34,244,000 
Non-interest income2,170,000 2,546,000 
Intersegment noninterest income864,000 510,000 
Factored receivable total revenue37,939,000 37,300,000 
Average net funds employed915,257,000 898,989,000 
Yield on average net funds employed16.49 %16.46 %
Accounts receivable purchased$2,610,177,000 $2,606,323,000 
Number of invoices purchased1,480,824 1,428,463 
Average invoice size$1,763 $1,825 
Average invoice size - transportation$1,724 $1,772 
Average invoice size - non-transportation$4,940 $5,631 
Our Factoring segment’s operating income decreased $0.7 million, or 7.6%.
Our average invoice size decreased 3.4% from $1,825 for the three months ended September 30, 2023 to $1,763 for the three months ended September 30, 2024. Additionally, the number of invoices purchased increased 3.7% period over period.
Net interest income at our Factoring segment increased period over period. Overall average net funds employed (“NFE”) increased 1.8% during the three months ended September 30, 2024 compared to the same period in 2023. The increase in average NFE was the result of increased invoice purchase volume offsetting decreased average invoice sizes. The transportation market remains soft. See further discussion under the Recent Developments: Trucking Transportation section. We maintained a high concentration in transportation factoring balances, which typically generate a higher yield than our non-transportation factoring balances. This concentration was at 97% at September 30, 2024 and 96% at September 30, 2023. Net interest income at our Factoring segment was also impacted by a decrease in its intersegment interest allocation charge period over period.
Credit loss expense at our Factoring segment is made up of credit loss expense related to factored receivables and loans at our Factoring segment as well as credit loss expense related to off balance sheet commitments to lend. Credit loss expense related to factored receivables and loans was $1.2 million for the three months ended September 30, 2024 compared to credit loss expense on factored receivables of $0.4 million for the three months ended September 30, 2023. The increase in credit loss expense was driven by an increase in required specific reserves period over period. The increase was partially offset by a decrease caused by changes in volume and mix of the portfolio period over period as well as decreased net charge-offs period over period. Changes in loss assumptions did not have a material impact on the change in credit loss expense period over period. There was a benefit to credit loss expense for off balance sheet credit exposures of $0.9 million during the three months ended September 30, 2024. There was no credit loss expense related to off balance sheet credit exposures during the three months ended September 30, 2023 as there were no such commitments to lend at that time.
Noninterest income at our Factoring segment decreased period over period due to a $0.9 million decrease in early termination fees. The decrease was partially offset by a gain on our revenue share asset of $0.4 million during the three months ended September 30, 2024 compared to a $0.1 million loss during the same period a year ago. There were no other significant variances in noninterest income at our Factoring segment.
Noninterest expense at our Factoring segment increased primarily due to a $1.3 million increase in salaries and employee benefits expense and a $0.6 million increase in professional fees. There were no other significant variances in noninterest expense at our Factoring segment.
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Payments
(Dollars in thousands)Three Months Ended September 30,
Payments20242023$ Change% Change
Total interest income$5,693 $4,917 $776 15.8 %
Intersegment interest allocations2,569 1,334 1,235 92.6 %
Total interest expense— — — — %
Net interest income (expense)8,262 6,251 2,011 32.2 %
Credit loss expense (benefit)(5)14 (19)(135.7)%
Net interest income after credit loss expense8,267 6,237 2,030 32.5 %
Noninterest income6,322 4,817 1,505 31.2 %
Noninterest expense16,598 14,556 2,042 14.0 %
Net intersegment noninterest income (expense)(604)(242)(362)(149.6)%
Net income (loss) before income tax expense$(2,613)$(3,744)$1,131 30.2 %
Three Months Ended September 30,
20242023
Supply chain financing factored receivables$101,336,000 $87,590,000 
Quickpay factored receivables68,526,000 84,664,000 
Factored receivable period end balance$169,862,000 $172,254,000 
Supply chain finance interest income$2,897,000 $2,316,000 
Quickpay interest income2,796,000 2,601,000 
Intersegment interest income2,569,000 1,334,000 
Total interest income8,262,000 6,251,000 
Broker noninterest income4,804,000 3,372,000 
Factor noninterest income1,339,000 1,312,000 
Other noninterest income179,000 133,000 
Intersegment noninterest income289,000 268,000 
Total noninterest income6,611,000 5,085,000 
Total revenue$14,873,000 $11,336,000 
Intersegment interest expense allocation$— $— 
Credit loss expense (benefit)(5,000)14,000 
Noninterest expense16,598,000 14,556,000 
Intersegment noninterest expense893,000 510,000 
Total expense$17,486,000 $15,080,000 
Operating income (loss)$(2,613,000)$(3,744,000)
Intersegment interest expense— — 
Depreciation expense253,000 181,000 
Software amortization expense743,000 177,000 
Intangible amortization expense1,687,000 1,703,000 
Earnings (losses) before interest, taxes, depreciation, and amortization$70,000 $(1,683,000)
EBITDA margin0.5 %(15)%
Number of invoices processed6,278,246 5,037,841 
Amount of payments processed$7,091,493,000 $5,329,580,000 
Network invoice volume661,628 303,300 
Network payment volume$1,063,228,000 $510,298,000 
Our Payments segment's operating loss decreased $1.1 million, or 30.2%.
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The number of invoices processed by our Payments segment increased 24.6% from 5,037,841 for the three months ended September 30, 2023 to 6,278,246 for the three months ended September 30, 2024, and the amount of payments processed increased 33.1% from $5.330 billion for the three months ended September 30, 2023 to $7.091 billion for the three months ended September 30, 2024 in the face of lower average invoice prices.
A "network transaction" occurs when a fully integrated TriumphPay payor receives an invoice from a fully integrated TriumphPay payee. All network transactions are included in our payment processing volume above. These transactions are facilitated through TriumphPay application programming interfaces ("APIs") with parties on both sides of the transaction using structured data; similar to how a credit card works at a point-of-sale terminal. The integrations largely automate the process and make it cheaper, faster and safer. During the three months ended September 30, 2024, we processed 661,628 network invoices representing a network payment volume of $1.063 billion. During the three months ended September 30, 2023, we processed 303,300 network invoices representing a network payment volume of $510.3 million.
Net interest income increased due to increased average rates at our Payments segment and increased intersegment interest allocation period over period. The increase in net interest income was partially offset by lower average balances at our Payments segment period over period.
Noninterest income increased due to a $1.4 million increase in payment and audit fees, including intersegment fees, earned by TriumphPay during the three months ended September 30, 2024 compared to the same period a year ago. There were no other significant changes in the components of noninterest income at our Payments segment period over period.
Noninterest expense at our Payment segment increased period over period driven by a $1.1 million increase in salaries and benefits expense, a $0.7 million increase in communications and technology expense, and a $0.6 million increase in software amortization period over period. There were no other significant variances in the components of noninterest expense at our Payments segment period over period.
The acquisition of HubTran during the year ended December 31, 2021 allows TriumphPay to create a fully integrated payments network for transportation; servicing Brokers and Factors. TriumphPay already offered tools and services to increase automation, mitigate fraud, create back-office efficiency and improve the payment experience. Through the acquisition of HubTran, TriumphPay created additional value through the enhancement of its presentment, audit, and payment capabilities for Shippers, third party logistics companies (i.e., Brokers) and their Carriers, and Factors. The acquisition of HubTran was a meaningful inflection point in the operations of TriumphPay as the TriumphPay strategy has shifted from a capital-intensive on-balance sheet product with a focus on interest income to an open-loop payments network for the trucking industry with a focus on fee revenue. It is for this reason that management believes that earnings before interest, taxes, depreciation, and amortization enhance investors' overall understanding of the financial performance of the Payments segment. Further, as a result of the HubTran acquisition, management recorded $27.3 million of intangible assets that has led to meaningful amounts of intangible amortization.
Corporate and Other
(Dollars in thousands)Three Months Ended September 30,
Corporate and Other20242023$ Change% Change
Total interest income$87 $44 $43 97.7 %
Intersegment interest allocations— — — — 
Total interest expense2,400 2,483 (83)(3.3)%
Net interest income (expense)(2,313)(2,439)126 5.2 %
Credit loss expense (benefit)221 13 208 1,600.0 %
Net interest income (expense) after credit loss expense(2,534)(2,452)(82)(3.3)%
Other noninterest income1,467 69 1,398 2,026.1 %
Noninterest expense27,070 21,829 5,241 24.0 %
Net income (loss) before income tax expense$(28,137)$(24,212)$(3,925)(16.2)%
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Corporate and other is not a reportable segment, but rather includes certain revenue and expense from the Company's holding company as well as activities not allocated to specific business segments. Corporate and other reported an operating loss of $28.1 million for the three months ended September 30, 2024 compared to an operating loss of $24.2 million for the three months ended September 30, 2023. The increased operating loss was driven by increased noninterest expense which was the result of a $2.2 million increase in salaries and benefits expense. Additionally, Corporate experienced a $1.1 million increase in occupancy expense and a $1.0 million increase in intangible amortization primarily driven by the building acquired during March of 2024. Further, Corporate experienced a $0.7 million increase in travel expense driven by increased travel of our executive leadership team period over period. The increased operating loss was partially offset by increased noninterest income which was the result of $1.4 million of rental income from the acquired building recognized during the three months ended September 30, 2024.
Results of Operations
Nine months ended September 30, 2024 compared with nine months ended September 30, 2023
Net Income
We earned net income of $12.3 million for the nine months ended September 30, 2024 compared to $31.5 million for the nine months ended September 30, 2023, a decrease of $19.2 million or 61.0%.
Nine Months Ended September 30, 2024
(Dollars in thousands, except per share amounts)20242023$ Change% Change
Interest income$317,037 $313,693 $3,344 1.1 %
Interest expense54,388 37,533 16,855 44.9 %
Net interest income262,649 276,160 (13,511)(4.9)%
Credit loss expense (benefit)14,314 6,068 8,246 135.9 %
Net interest income after credit loss expense (benefit)248,335 270,092 (21,757)(8.1)%
Noninterest income49,663 35,943 13,720 38.2 %
Noninterest expense283,360 265,936 17,424 6.6 %
Net income (loss) before income taxes14,638 40,099 (25,461)(63.5)%
Income tax expense (benefit)2,386 8,645 (6,259)(72.4)%
Net income (loss)$12,252 $31,454 $(19,202)(61.0)%
Details of the changes in the various components of net income are further discussed below.
Net Interest Income
Our operating results depend primarily on our net interest income, which is the difference between interest income on interest earning assets, including loans and securities, and interest expense incurred on interest bearing liabilities, including deposits and other borrowed funds. Interest rate fluctuations, as well as changes in the amount and type of interest earning assets and interest bearing liabilities, combine to affect net interest income. Our net interest income is affected by changes in the amount and mix of interest earning assets and interest bearing liabilities, referred to as a “volume change.” It is also affected by changes in yields earned on interest earning assets and rates paid on interest bearing liabilities, referred to as a “rate change.”
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The following table presents the distribution of average assets, liabilities and equity, as well as interest income and fees earned on average interest earning assets and interest expense paid on average interest bearing liabilities. Average balances and interest are inclusive of assets and deposits classified as held for sale.
Nine Months Ended September 30,
20242023
(Dollars in thousands)Average
Balance		Interest
Average
Rate(4)
Average
Balance		Interest
Average
Rate(4)
Interest earning assets:
Cash and cash equivalents$463,081 $18,945 5.46 %$238,622 $9,051 5.07 %
Taxable securities349,710 17,306 6.61 %306,472 14,369 6.27 %
Tax-exempt securities3,263 68 2.78 %9,451 183 2.59 %
FHLB and other restricted stock11,619 845 9.71 %18,893 741 5.24 %
Loans (1)
4,147,308 279,873 9.01 %4,219,009 289,349 9.17 %
Total interest earning assets4,974,981 317,037 8.51 %4,792,447 313,693 8.75 %
Noninterest earning assets:
Cash and cash equivalents80,197 82,020 
Other noninterest earning assets599,626 540,802 
Total assets$5,654,804 $5,415,269 
Interest bearing liabilities:
Deposits:
Interest bearing demand$733,930 $3,002 0.55 %$805,756 $2,054 0.34 %
Individual retirement accounts49,574 497 1.34 %60,507 323 0.71 %
Money market571,860 12,196 2.85 %515,864 5,521 1.43 %
Savings537,825 4,411 1.10 %537,598 1,506 0.37 %
Certificates of deposit256,297 5,897 3.07 %285,207 2,714 1.27 %
Brokered time deposits374,162 14,508 5.18 %283,181 10,090 4.76 %
Other brokered deposits29,577 1,202 5.43 %8,609 345 5.36 %
Total interest bearing deposits2,553,225 41,713 2.18 %2,496,722 22,553 1.21 %
Federal Home Loan Bank advances132,828 5,481 5.51 %198,040 7,751 5.23 %
Subordinated notes108,864 3,676 4.51 %108,119 3,936 4.87 %
Junior subordinated debentures41,952 3,518 11.20 %41,376 3,293 10.64 %
Other borrowings4 — — %966 — — %
Total interest bearing liabilities2,836,873 54,388 2.56 %2,845,223 37,533 1.76 %
Noninterest bearing liabilities and equity:
Noninterest bearing demand deposits1,852,360 1,639,413 
Other liabilities82,722 79,494 
Total equity882,849 851,139 
Total liabilities and equity$5,654,804 $5,415,269 
Net interest income$262,649 $276,160 
Interest spread (2)
5.95 %6.99 %
Net interest margin (3)
7.05 %7.70 %
(1)Balance totals include respective nonaccrual assets.
(2)Net interest spread is the yield on average interest earning assets less the rate on interest bearing liabilities.
(3)Net interest margin is the ratio of net interest income to average interest earning assets.
(4)Ratios have been annualized.
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The following table presents loan yields earned on our loan portfolios:
Nine Months Ended September 30,
20242023
(Dollars in thousands)Average
Balance		InterestAverage RateAverage
Balance		InterestAverage Rate
Banking loans$2,992,402 $161,338 7.20 %$3,049,656 $169,465 7.43 %
Factoring receivables980,847 101,964 13.89 %1,047,557 108,769 13.88 %
Payments receivables174,059 16,571 12.72 %121,796 11,115 12.20 %
Total loans$4,147,308 $279,873 9.01 %$4,219,009 $289,349 9.17 %
We earned net interest income of $262.6 million for the nine months ended September 30, 2024 compared to $276.2 million for the nine months ended September 30, 2023, a decrease of $13.6 million, or 4.9%, primarily driven by the following factors.
Interest income increased $3.3 million, or 1.1%, due to increased yields across all of our broad interest earning asset categories with the exception of loans. This increase reflects an increase in total average interest earning assets of $182.5 million, or 3.8% including an increase of $195.5 million in average cash and cash equivalents. That said, we experienced a decrease in average total loans of $71.7 million, or 1.7%. The average balance of our higher yielding Factoring factored receivables decreased $66.7 million, or 6.4%, and we experienced an increase in average Payments factored receivables. The decrease in average Factoring factored receivables and the increase in Payments factored receivables was impacted by our decision to move supply chain financing receivables from our Factoring segment to our Payments segment at the end of the second quarter 2023. We experienced a decrease in average Banking loans of $57.3 million, or 1.9% due to decreases in the average balances of residential real estate, farmland, commercial, consumer, and mortgage warehouse loans. Interest income from our Banking loans is impacted by our lower yielding mortgage warehouse lending product. The average mortgage warehouse lending balance was $693.0 million for the nine months ended September 30, 2024 compared to $782.4 million for the nine months ended September 30, 2023. A component of interest income consists of discount accretion on acquired loan portfolios and acquired liquid credit loans. We recognized discount accretion on purchased loans of $2.5 million and $4.2 million for the nine months ended September 30, 2024 and 2023, respectively.
Interest expense increased $16.9 million, or 44.9%, due to increased average rates on interest bearing liabilities discussed below. The increase in interest expense was partially offset by a decrease in average interest bearing liabilities of $8.4 million, or 0.3%; however, average total interest bearing deposits increased $56.5 million, or 2.3%. Average noninterest bearing deposits grew $212.9 million.
Net interest margin decreased to 7.05% for the nine months ended September 30, 2024 from 7.70% for the nine months ended September 30, 2023, a decrease of 65 basis points, or 8.4%.
The decrease in our net interest margin was primarily driven by an increase in our average cost of interest bearing liabilities of 80 basis points. This increase in average cost was caused by generally higher interest rates paid on our interest-bearing liabilities driven by changes in interest rates in the macro economy.
Our net interest margin was impacted by a decrease in yield on our interest earning assets of 24 basis points to 8.51% for the nine months ended September 30, 2024. This decrease was primarily driven by lower yields on loans which decreased 16 basis points to 9.01% for the period. Factoring yield was relatively flat period over period, but average Factoring factored receivables as a percentage of the total loan portfolio decreased slightly which had a downward impact on total loan yield. Our transportation factoring balances, which generally generate a higher yield than our non-transportation factoring balances, were 97% and 96% of our Factoring portfolio at September 30, 2024 and 2023, respectively. Banking yield decreased slightly and Payments yield increased slightly period over period. Non-loan yields increased period over period.
Our mortgage warehouse business has nearly self-funded for several quarters due to the servicing deposits of its customers. The average balance of such deposits was $607.5 million for the nine months ended September 30, 2024. These deposits are noninterest bearing deposits on our balance sheet. Despite their classification, many of these deposits are not truly free of cost as our clients are compensated for these balances in the form of an earnings interest rebate rather than deposit interest. As a result, such noninterest bearing deposits decrease our loan yield rather than increase our deposit rates. It is important to note that our net interest margin is not affected by this arrangement. During the nine months ended September 30, 2024, these deposits decreased our overall yield on loans by 59 bps and our overall cost of deposits and cost of funds would have been 56 bps and 52 bps higher, respectively.

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The following table shows the effects that changes in average balances (volume) and average interest rates (rate) had on the interest earned on our interest earning assets and the interest incurred on our interest bearing liabilities:
Nine Months Ended
September 30, 2024 vs. 2023
Increase (Decrease) Due to:Net Increase
(Dollars in thousands)RateVolume
Interest earning assets:
Cash and cash equivalents$711 $9,183 $9,894 
Taxable securities797 2,140 2,937 
Tax-exempt securities14 (129)(115)
FHLB and other restricted stock633 (529)104 
Loans(4,637)(4,839)(9,476)
Total interest income(2,482)5,826 3,344 
Interest bearing liabilities:
Interest bearing demand1,242 (294)948 
Individual retirement accounts284 (110)174 
Money market5,481 1,194 6,675 
Savings2,903 2 2,905 
Certificates of deposit3,848 (665)3,183 
Brokered time deposits890 3,528 4,418 
Other brokered deposits5 852 857 
Total interest bearing deposits14,653 4,507 19,160 
Federal Home Loan Bank advances421 (2,691)(2,270)
Subordinated notes(285)25 (260)
Junior subordinated debentures177 48 225 
Other borrowings— — — 
Total interest expense14,966 1,889 16,855 
Change in net interest income$(17,448)$3,937 $(13,511)
Credit Loss Expense
Credit loss expense is the amount of expense that, based on our judgment, is required to maintain the allowances for credit losses (“ACL”) at an appropriate level under the current expected credit loss model. The determination of the amount of the allowance is complex and involves a high degree of judgment and subjectivity. Refer to Note 1 of the Company’s 2023 Form 10-K for detailed discussion regarding ACL methodologies for available for sale debt securities, held to maturity securities and loans held for investment.
The following table presents the major categories of credit loss expense:
Nine Months Ended September 30,
(Dollars in thousands)20242023$ Change% Change
Credit loss expense on loans$14,151 $6,218 $7,933 127.6 %
Credit loss expense on off balance sheet credit exposures(30)(596)566 95.0 %
Credit loss expense on held to maturity securities193 446 (253)(56.7)%
Credit loss expense on available for sale securities— — — — 
Total credit loss expense$14,314 $6,068 $8,246 135.9 %
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For available for sale debt securities in an unrealized loss position, the Company evaluates the securities at each measurement date to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an ACL on the balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings via credit loss expense. At December 31, 2023 and September 30, 2024, the Company determined that all impaired available for sale securities experienced a decline in fair value below the amortized cost basis due to noncredit-related factors. Therefore, the Company carried no ACL at those respective dates and there was no credit loss expense recognized by the Company during the nine months ended September 30, 2024. The same was true for the same period in the prior year.
The ACL on held to maturity securities is estimated at each measurement date on a collective basis by major security type. At September 30, 2024 and December 31, 2023, the Company’s held to maturity securities consisted of three investments in the subordinated notes of collateralized loan obligation (“CLO”) funds. Expected credit losses for these securities are estimated using a discounted cash flow methodology which considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. At September 30, 2024 and December 31, 2023, the Company carried $5.5 million and $6.2 million of these HTM securities at amortized cost, respectively. The ACL on these balances was $3.4 million at September 30, 2024 and $3.2 million at December 31, 2023 and we recognized credit loss expense of $0.2 million during the nine months ended September 30, 2024. Credit loss expense during the nine months ended September 30, 2023 was $0.4 million. None of the overcollateralization triggers tied to the CLO securities were tripped as of September 30, 2024. Ultimately, the realized cash flows on CLO securities such as these will be driven by a variety of factors, including credit performance of the underlying loan portfolio, adjustments to the portfolio by the asset manager, and the timing of a potential call.
Our ACL on loans was $41.2 million as of September 30, 2024, compared to $35.2 million as of December 31, 2023, representing an ACL to total loans ratio of 0.95% and 0.85% respectively.
Our credit loss expense on loans increased $7.9 million, or 127.6%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
During the nine months ended September 30, 2023, new adverse developments with one of the two remaining Over-Formula Advance clients caused us to charge-off the entire Over-Formula Advance amount due from that client. This resulted in a net charge-off of $3.3 million; however, this net charge-off had no impact on credit loss expense as the entire amount had been reserved in a prior period. In accordance with the Agreement reached with Covenant, Covenant reimbursed us for $1.7 million of this charge-off. We continue to reserve the full balance of the Over-Formula Advance clients at September 30, 2024 which totals $1.9 million.
The increase in credit loss expense was primarily driven by changes in required specific reserves. Such specific reserves increased $3.5 million during the nine months ended September 30, 2024 compared to a decrease of $8.7 million during the same period a year ago. Changes to projected loss drivers and prepayment speeds that the Company forecasted over the reasonable and supportable forecast periods to calculate expected losses resulted in credit loss expense of $2.5 million during the nine months ended September 30, 2024 compared to credit loss expense of $0.6 million during the same period a year ago.
The increase in credit loss expense was partially offset by net charge-off activity during the period. Net charge-offs during the nine months ended September 30, 2024 were $8.1 million compared to $14.2 million during the same period a year ago. Approximately $2.5 million of the $8.1 million net charge-offs for the nine months ended September 30, 2024 were reserved in a prior period while approximately $8.5 million of the $14.2 million net charge-offs for the nine months ended September 30, 2023 were reserved in a prior period. Such prior period reserves are included in the discussion of changes in specific reserves above.
Changes in volume and mix of the loan portfolio drove decrease in credit loss expense period over period. Such changes resulted in a benefit to credit loss expense of $0.1 million during the nine months ended September 30, 2024 compared to $0.2 million of credit loss expense during the same period a year ago.
Credit loss expense for off balance sheet credit exposures increased $0.6 million, primarily due to changes to outstanding commitments to fund and assumed loss rates period over period.
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Noninterest Income
The following table presents our major categories of noninterest income:
Nine Months Ended September 30,
(Dollars in thousands)20242023$ Change% Change
Service charges on deposits$5,402 $5,210 $192 3.7 %
Card income6,088 6,152 (64)(1.0 %)
Net gains (losses) on sale or call of securities— 5 (5)(100.0 %)
Net gains (losses) on sale of loans184 206 (22)(10.7 %)
Fee income26,329 21,720 4,609 21.2 %
Insurance commissions4,545 3,970 575 14.5 %
Other7,115 (1,320)8,435 639.0 %
Total noninterest income$49,663 $35,943 $13,720 38.2 %
Noninterest income increased $13.7 million, or 38.2%. Changes in selected components of noninterest income in the above table are discussed below.
•Fee income. Fee income increased $4.6 million, or 21.2% primarily due to a $4.9 million increase in payment fees earned by TriumphPay during the nine months ended September 30, 2024 compared to the same period a year ago.
•Insurance commissions. Insurance commissions increased $0.6 million, or 14.5%, due to higher volumes of processed policies.
•Other. Other noninterest income increased $8.4 million, or 639.0% primarily due to a gain on our revenue share asset of $1.3 million during the nine months ended September 30, 2024 compared to a loss of $1.9 million during the same period a year ago. We also recognized $3.0 million of rental income on the building we acquired during March of 2024. Further, we recognized a $0.6 million gain on equity security activity during the nine months ended September 30, 2024 compared to a loss of $0.1 million during the same period a year ago.
Noninterest Expense
The following table presents our major categories of noninterest expense:
Nine Months Ended September 30,
(Dollars in thousands)20242023$ Change% Change
Salaries and employee benefits$165,637 $159,789 $5,848 3.7 %
Occupancy, furniture and equipment24,902 21,537 3,365 15.6 %
FDIC insurance and other regulatory assessments1,973 1,968 5 0.3 %
Professional fees12,833 10,061 2,772 27.6 %
Amortization of intangible assets9,193 8,700 493 5.7 %
Advertising and promotion4,638 4,839 (201)(4.2 %)
Communications and technology38,623 34,034 4,589 13.5 %
Software amortization4,015 3,054 961 31.5 %
Travel and entertainment4,453 4,527 (74)(1.6 %)
Other17,093 17,427 (334)(1.9 %)
Total noninterest expense$283,360 $265,936 $17,424 6.6 %
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Noninterest expense increased $17.4 million, or 6.6%. Details of the more significant changes in the various components of noninterest expense are further discussed below.
•Salaries and Employee Benefits. Salaries and employee benefits expenses increased $5.8 million, or 3.7%. Employee salaries increased $3.9 million while payroll taxes were flat period over period. Bonus expense increased $0.8 million period over period. The size of our workforce increased period over period due to organic growth within the Company. Our average full-time equivalent employees were 1,543.9 and 1,470.2 for the nine months ended September 30, 2024 and 2023, respectively. Employee benefits expense such as 401(k) matching, employee insurance, and stock based compensation paid to employees increased $3.7 million. These increases were partially offset by a decrease in temporary labor expense of $0.8 million and a decrease in commissions expense of $1.8 million period over period.
•Occupancy, Furniture and Equipment. Occupancy, furniture and equipment expenses increased $3.4 million, or 15.6%, primarily due to $2.1 million of expense related to the building we acquired during March of 2024. The additional increase is driven by growth in our operations period over period.
•Professional Fees. Professional fees increased $2.8 million, or 27.6%, primarily due to a $2.3 million increase in legal and consulting fees period over period.
•Amortization of intangible assets. Amortization of intangible assets increased $0.5 million, or 5.7%, primarily due to additional amortization resulting from the intangible assets related to the building we acquired during March of 2024.
•Communications and Technology. Communications and technology expenses increased $4.6 million, or 13.5%, primarily as a result of increased spending on IT infrastructure, information security, and initiatives designed to develop efficiency in our IT operations.
•Software amortization. Software amortization increased $1.0 million, or 31.5%, primarily due to additional software assets coming on line during 2024.
•Other. Other noninterest expense includes loan-related expenses, training and recruiting, postage, insurance, and subscription services. Other noninterest expense was relatively flat period over period as there were no significant variances period over period.
Income Taxes
The amount of income tax expense is influenced by the amount of pre-tax income, the amount of tax-exempt income and the effect of changes in valuation allowances maintained against deferred tax benefits.
Income tax expense decreased $6.3 million, or 72.4%, from $8.6 million for the nine months ended September 30, 2023 to $2.4 million for the nine months ended September 30, 2024. The effective tax rate was 16% for the nine months ended September 30, 2024 and 22% for the nine months ended September 30, 2023. The effective tax rate for the nine months ended September 30, 2024 was impacted by an adjustment to our disallowance related to highly compensated individuals as well as a $0.9 million research and development tax credit recognized during the period. The effective tax rate for the nine months ended September 30, 2023 was impacted by a performance based performance stock units windfall that was recorded during the period as those related shares vested during the period.
Operating Segment Results
Our reportable segments are Banking, Factoring, and Payments which have been determined based upon their business processes and economic characteristics. This determination also gave consideration to the structure and management of various product lines. The Banking segment includes the operations of TBK Bank. Our Banking segment derives its revenue principally from investments in interest earning assets as well as noninterest income typical for the banking industry. The Factoring segment includes the operations of Triumph Financial Services with revenue derived from factoring services. The Payments segment includes the operations of TBK Bank's TriumphPay division, which provides a presentment, audit, and payment solution to Shipper, Broker, and Factor clients in the trucking industry. The Payments segment derives its revenue from transaction fees and interest income on factored receivables related to invoice payments. These factored receivables consist of both invoices where we offer a Carrier a quickpay opportunity to receive payment at a discount in advance of the standard payment term for such invoice in exchange for the assignment of such invoice to us and from offering Brokers the ability to settle their invoices with us on an extended term following our payment to their Carriers as an additional liquidity option for such Brokers.
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Prior to September 30, 2024, the Company disclosed Corporate as a reportable segment. The Company has determined that what was previously deemed the Corporate reportable segment consists of other business activities that do not represent a reportable segment, but rather, such activities belong in a Corporate and Other category as reported in the tabular disclosure below. It should be noted that such restructuring of the tabular disclosure did not result in any changes to the Company's revenue and expense allocation methodology described below. The Company restructured prior period tabular disclosures to achieve appropriate comparability.
Expenses that are directly attributable to the Company's Banking, Factoring, and Payments segments such as, but not limited to, occupancy, salaries and benefits to employees that are fully dedicated to the segment, and certain technology costs that can be attributed to specific users or functional areas within the segment are allocated as such. The Company continues to make considerable investments in shared services that benefit the entire organization and these expenses are allocated to the Corporate and Other category. The Company allocates such expenses to the Corporate and Other category in order for the Company's chief operating decision maker and investors to have clear visibility into the operating performance of each reportable segment.
We allocate intersegment interest expense to the Factoring and Payments segments based on one-month term SOFR for their funding needs. When the Payments segment is self-funded, with customer deposit funding in excess of its factored receivables, intersegment interest income is allocated based on the Federal Funds effective rate. Management believes that such intersegment interest allocations appropriately reflect the current interest rate environment.
Reported segments and the financial information of the reported segments are not necessarily comparable with similar information reported by other financial institutions. Additionally, because of the interrelationships of the various segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. Changes in management structure or allocation methodologies and procedures may result in future changes to previously reported segment financial data. With the exception of the Corporate and Other discussion above, the accounting policies of the segments are substantially the same as those described in the “Summary of Significant Accounting Policies” in Note 1 of the Company’s 2023 Form 10-K.
Transactions between segments consist primarily of borrowed funds, payment network fees, and servicing fees. Intersegment interest expense is allocated to the Factoring and Payments segments as described above. Payment network fees are paid by the Factoring segment to the Payments segment for use of the payments network. Beginning prospectively on June 1, 2023, factoring transactions with freight broker clients were transferred from our Factoring segment to our Payments segment to align with TriumphPay's supply chain finance product offerings. Servicing fees are paid by the Payments segment to the Factoring segment for servicing such product. Beginning prospectively on January 1, 2024, the Factoring and Payments segments began paying fees to our Banking segment for the Banking segment's execution of various banking services that benefit those segments. Credit loss expense is allocated based on the segment’s ACL determination. Noninterest income and expense directly attributable to a segment are assigned to it with various shared service costs such as human resources, accounting, finance, risk management and information technology expense assigned to the Corporate and Other category if they are not directly attributable to a segment. Taxes are paid on a consolidated basis and are not allocated for segment purposes.
The following tables present our primary operating results for our operating segments:
(Dollars in thousands)TotalCorporate
Nine Months Ended September 30, 2024BankingFactoringPaymentsSegments
and Other(1)
Consolidated
Total interest income$198,284 $101,964 $16,571 $316,819 $218 $317,037 
Intersegment interest allocations20,643 (27,383)6,740 — — — 
Total interest expense47,193 — — 47,193 7,195 54,388 
Net interest income (expense)171,734 74,581 23,311 269,626 (6,977)262,649 
Credit loss expense (benefit)10,207 3,859 55 14,121 193 14,314 
Net interest income after credit loss expense161,527 70,722 23,256 255,505 (7,170)248,335 
Noninterest income21,613 7,089 17,732 46,434 3,229 49,663 
Noninterest expense96,003 59,357 50,153 205,513 77,847 283,360 
Net intersegment noninterest income (expense)(2)
397 1,227 (1,624)— — — 
Net income (loss) before income tax expense$87,534 $19,681 $(10,789)$96,426 $(81,788)$14,638 
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(Dollars in thousands)TotalCorporate
Nine Months Ended September 30, 2023BankingFactoringPaymentsSegments
and Other(1)
Consolidated
Total interest income$193,678 $108,769 $11,115 $313,562 $131 $313,693 
Intersegment interest allocations23,420 (28,176)4,756 — — — 
Total interest expense30,305 — — 30,305 7,228 37,533 
Net interest income (expense)186,793 80,593 15,871 283,257 (7,097)276,160 
Credit loss expense (benefit)3,164 2,405 55 5,624 444 6,068 
Net interest income after credit loss expense183,629 78,188 15,816 277,633 (7,541)270,092 
Noninterest income17,998 5,104 12,643 35,745 198 35,943 
Noninterest expense95,677 60,358 46,912 202,947 62,989 265,936 
Net intersegment noninterest income (expense)(2)
— (120)120 — — — 
Net income (loss) before income tax expense$105,950 $22,814 $(18,333)$110,431 $(70,332)$40,099 
(1) Includes revenue and expense from the Company’s holding company, which does not meet the definition of an operating segment. Also includes corporate shared service costs such as the majority of salaries and benefits expense for our executive leadership team, as well as other selling, general, and administrative shared services costs including human resources, accounting, finance, risk management and a significant amount of information technology expense.
(2) Net intersegment noninterest income (expense) includes:
(Dollars in thousands)BankingFactoringPayments
Nine Months Ended September 30, 2024
Factoring revenue received from Payments$— $2,364 $(2,364)
Payments revenue received from Factoring— (818)818 
Banking revenue received from Payments and Factoring$397 $(319)$(78)
Net intersegment noninterest income (expense)$397 $1,227 $(1,624)
Nine Months Ended September 30, 2023
Factoring revenue received from Payments$— $680 $(680)
Payments revenue received from Factoring— (800)800 
Banking revenue received from Payments and Factoring$— $— $— 
Net intersegment noninterest income (expense)$— $(120)$120 
(Dollars in thousands)TotalCorporate
September 30, 2024BankingFactoringPaymentsSegmentsand OtherEliminationsConsolidated
Total assets$5,357,731 $1,165,591 $526,467 $7,049,789 $1,151,899 $(2,335,642)$5,866,046 
Gross loans$3,716,900 $1,033,783 $169,862 $4,920,545 $— $(587,578)$4,332,967 
(Dollars in thousands)TotalCorporate
December 31, 2023BankingFactoringPaymentsSegmentsand OtherEliminationsConsolidated
Total assets$4,918,527 $1,077,367 $546,985 $6,542,879 $1,056,646 $(2,252,191)$5,347,334 
Gross loans$3,595,527 $941,926 $174,728 $4,712,181 $— $(549,081)$4,163,100 
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Banking
(Dollars in thousands)Nine Months Ended September 30,
Banking20242023$ Change% Change
Total interest income$198,284 $193,678 $4,606 2.4 %
Intersegment interest allocations20,643 23,420 (2,777)(11.9 %)
Total interest expense47,193 30,305 16,888 55.7 %
Net interest income171,734 186,793 (15,059)(8.1 %)
Credit loss expense (benefit)10,207 3,164 7,043 222.6 %
Net interest income after credit loss expense161,527 183,629 (22,102)(12.0 %)
Noninterest income21,613 17,998 3,615 20.1 %
Noninterest expense96,003 95,677 326 0.3 %
Net intersegment noninterest income (expense)397 — 397 100.0 %
Net income (loss) before income tax expense$87,534 $105,950 $(18,416)(17.4 %)
Our Banking segment’s operating income decreased $18.4 million, or 17.4%.
Total interest income increased $4.6 million, or 2.4%, primarily as a result of increased yields and average balances on our non-loan interest earning assets at our Banking segment. The increase was partially offset by slight decreases in average loans and loan yield at our Banking segment. More specifically, average loans in our Banking segment, excluding intersegment loans, decreased 1.9% from $3.050 billion for the nine months ended September 30, 2023 to $2.992 billion for the nine months ended September 30, 2024. Intersegment interest income allocated to our Banking segment decreased period over period due to decreased average factored receivables balances at our Factoring segment and increased funding provided by our Payments segment resulting in increased intersegment interest allocation to such segment..
Interest expense increased $16.9 million, or 55.7% primarily due to higher interest rates paid on our Banking segment interest-bearing liabilities driven by changes in interest rates in the macro economy. Additionally, average total interest bearing deposits increased $56.5 million, or 2.3%.
Credit loss expense at our Banking segment is made up of credit loss expense related to loans and credit loss expense related to off balance sheet commitments to lend. Credit loss expense related to loans was $10.2 million for the nine months ended September 30, 2024 compared to $3.8 million for the nine months ended September 30, 2023. The increase in credit loss expense was the result of increased required specific reserves and changes to the projected loss drivers and prepayment speeds that the Company forecasted over the reasonable and supportable forecast period. The increase was partially offset by a decreased driven by changes in the volume and mix of our loan portfolio at our Banking segment period over period as well as decreased net charge-offs period over period.
Credit loss expense for off balance sheet credit exposures increased $0.6 million from a benefit of $0.6 million for the nine months ended September 30, 2023 to an insignificant amount for the nine months ended September 30, 2024, primarily due to changes to outstanding commitments to fund and assumed loss rates period over period.
Noninterest income at our Banking segment increased period over period due to a $0.6 million gain on equity security activity during the nine months ended September 30, 2024 compared to a $0.1 million loss on such activity during the same period a year ago. Additionally our Banking segment experienced a $0.7 million increase in fee income, a $0.6 million increase in insurance commissions, and a $0.5 million decrease in write-downs on repossessed assets period over period. There were no other significant changes in the components of noninterest income at our Banking segment period over period.
Noninterest expense at our Banking segment increased slightly primarily due to an increase in communications and technology expense of $2.7 million and an increase in professional fees of $1.5 million period over period. These increases were partially offset by a decrease in salaries and employee benefits of $3.2 million and a decrease in amortization of intangible assets of $0.5 million. There were no other significant changes in the components of noninterest expense at our Banking segment period over period.
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During the nine months ended September 30, 2024, the aggregate outstanding balances of our banking products increased $82.9 million, or 2.7%, to $3.129 billion as of September 30, 2024. See the Financial Condition section below for further discussion of changes in loan balances:
(Dollars in thousands)September 30,
2024		December 31,
2023		$ Change% Change
Banking
Commercial real estate$762,343 $812,704 $(50,361)(6.2 %)
Construction, land development, land217,148 136,720 80,428 58.8 %
1-4 family residential126,103 125,916 187 0.1 %
Farmland57,621 63,568 (5,947)(9.4 %)
Commercial - General284,989 303,332 (18,343)(6.0 %)
Commercial - Agriculture52,997 47,059 5,938 12.6 %
Commercial - Equipment488,326 460,008 28,318 6.2 %
Commercial - Asset-based lending205,476 246,065 (40,589)(16.5 %)
Commercial - Liquid Credit59,539 113,901 (54,362)(47.7 %)
Consumer6,990 8,326 (1,336)(16.0 %)
Mortgage Warehouse867,790 728,847 138,943 19.1 %
Total banking loans$3,129,322 $3,046,446 $82,876 2.7 %
Factoring
(Dollars in thousands)Nine Months Ended September 30,
Factoring20242023$ Change% Change
Total interest income$101,964 $108,769 $(6,805)(6.3 %)
Intersegment interest allocations(27,383)(28,176)793 2.8 %
Total interest expense— — — — 
Net interest income74,581 80,593 (6,012)(7.5 %)
Credit loss expense (benefit)3,859 2,405 1,454 60.5 %
Net interest income after credit loss expense70,722 78,188 (7,466)(9.5 %)
Noninterest income7,089 5,104 1,985 38.9 %
Noninterest expense59,357 60,358 (1,001)(1.7 %)
Net intersegment noninterest income (expense)1,227 (120)1,347 1,122.5 %
Net income (loss) before income tax expense$19,681 $22,814 $(3,133)(13.7 %)
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Nine Months Ended September 30,
20242023
Factored receivable period end balance$1,031,633,000 $1,041,448,000 
Commercial loans period end balance$2,150,000 $— 
Yield on average receivable balance13.89 %13.88 %
Year to date charge-off rate(1)
0.34 %0.85 %
Factored receivables - transportation concentration97 %96 %
Interest income, including fees$101,964,000 $108,769,000 
Noninterest income(2)
7,089,000 5,104,000 
Intersegment noninterest income2,364,000 680,000 
Factored receivable total revenue111,417,000 114,553,000 
Average net funds employed876,059,000 931,645,000 
Yield on average net funds employed16.99 %16.44 %
Accounts receivable purchased$7,622,301,000 $8,266,403,000 
Number of invoices purchased4,280,815 4,415,189 
Average invoice size$1,781 $1,872 
Average invoice size - transportation$1,744 $1,819 
Average invoice size - non-transportation$4,512 $5,527 
(1)September 30, 2023 includes a $3.3 million charge-off of an over-formula advance balance, which contributed approximately 0.32% to the net charge-off rate for the period. In accordance with the agreement reached with Covenant, Covenant has reimbursed us for $1.7 million of this charge-off.
Our Factoring segment’s operating income decreased $3.1 million, or 13.7%.
Our average invoice size decreased 4.9% from $1,872 for the nine months ended September 30, 2023 to $1,781 for the nine months ended September 30, 2024 and the number of invoices purchased decreased 3.0% period over period.
Net interest income at our Factoring segment decreased period over period. Overall average net funds employed (“NFE”) decreased 6.0% during the nine months ended September 30, 2024 compared to the same period in 2023. The decrease in average NFE was the result of decreased invoice purchase volume and decreased average invoice sizes. Those, in turn, resulted from a soft transportation market. See further discussion under the Recent Developments: Trucking Transportation section. We maintained high concentration in transportation factoring balances, which typically generate a higher yield than our non-transportation factoring balances. This concentration, calculated based on receivables held for investment and held for sale, was at 96% at September 30, 2023 and 97% at September 30, 2024. Net interest income at our Factoring segment was also impacted by a decrease in its intersegment interest allocation charge period over period.
Credit loss expense at our Factoring segment is made up of credit loss expense related to factored receivables and loans at our Factoring segment as well as credit loss expense related to off balance sheet commitments to lend to the extent there are any such commitments. Credit loss expense related to factored receivables and loans was $3.9 million for the nine months ended September 30, 2024 compared to credit loss expense of $2.4 million for the nine months ended September 30, 2023. The increase in credit loss expense was driven by an increase in required specific reserves period over period and changes in volume and mix of the portfolio period over period. The increase was partially offset by a decrease in net charge-offs period over period. Changes in loss assumptions did not have a material impact on the change in credit loss expense period over period. Credit loss expense for off balance sheet credit exposures was $0.0 million for the nine months ended September 30, 2024 and 2023 as there were no commitments to lend at these dates.
The increase in noninterest income at our Factoring segment was primarily due to a gain on the revenue share asset at our Factoring segment of $1.3 million during the nine months ended September 30, 2024 compared to a loss of $1.9 million during the same period a year ago. The increase was partially offset by a $0.5 million decrease in early termination fees. There were no other significant changes in the components of noninterest income at our Factoring segment period over period.
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Noninterest expense decreased primarily due to a $0.9 million decrease in communications and technology expense, a $0.5 million decrease in software amortization, and a $0.5 million decrease in bank service charges period over period. These decreases were partially offset by a $1.4 million increase in professional fees period over period. There were no other significant changes in the components of noninterest expense at our Factoring segment period over period.
Payments
(Dollars in thousands)Nine Months Ended September 30,
Payments20242023$ Change% Change
Total interest income$16,571 $11,115 $5,456 49.1 %
Intersegment interest allocations6,740 4,756 1,984 41.7 %
Total interest expense— — — — %
Net interest income 23,311 15,871 7,440 46.9 %
Credit loss expense (benefit)55 55 — — %
Net interest income after credit loss expense23,256 15,816 7,440 47.0 %
Noninterest income17,732 12,643 5,089 40.3 %
Noninterest expense50,153 46,912 3,241 6.9 %
Net intersegment noninterest income (expense)(1,624)120 (1,744)(1453.3)%
Net income (loss) before income tax expense$(10,789)$(18,333)$7,544 41.1 %
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Nine Months Ended
20242023
Supply chain financing factored receivables$101,336,000 $87,590,000 
Quickpay factored receivables68,526,000 84,664,000 
Factored receivable period end balance$169,862,000 $172,254,000 
Supply chain finance interest income$8,099,000 $3,137,000 
Quickpay interest income8,472,000 7,978,000 
Intersegment interest income6,740,000 4,756,000 
Total interest income23,311,000 15,871,000 
Broker noninterest income13,311,000 8,335,000 
Factor noninterest income3,930,000 3,955,000 
Other noninterest income491,000 353,000 
Intersegment noninterest income818,000 800,000 
Total noninterest income18,550,000 13,443,000 
Total revenue$41,861,000 $29,314,000 
Intersegment interest expense$— $— 
Credit loss expense (benefit)55,000 55,000 
Noninterest expense50,153,000 46,912,000 
Intersegment noninterest expense2,442,000 680,000 
Total expense52,650,000 47,647,000 
Operating income (loss)$(10,789,000)$(18,333,000)
Interest expense— — 
Depreciation expense760,000 387,000 
Software amortization expense1,850,000 532,000 
Intangible amortization expense5,076,000 4,980,000 
Earnings (losses) before interest, taxes, depreciation, and amortization$(3,103,000)$(12,434,000)
EBITDA margin(7)%(42)%
Number of invoices processed18,058,041 13,825,124 
Amount of payments processed$20,158,760,000 $15,300,445,000 
Network invoice volume1,984,605 644,557 
Network payment volume$3,231,445,000 $1,099,913,000 
Our Payments segment's operating loss decreased $7.5 million, or 41.1%.
The number of invoices processed by our Payments segment increased 30.6% from 13,825,124 for the nine months ended September 30, 2023 to 18,058,041 for the nine months ended September 30, 2024, and the amount of payments processed increased 31.8% from $15.300 billion for the nine months ended September 30, 2023 to $20.159 billion for the nine months ended September 30, 2024.
We began processing network transactions during the first quarter of 2022. When a fully integrated TriumphPay payor receives an invoice from a fully integrated TriumphPay payee, we call that a “network transaction.” All network transactions are included in our payment processing volume above. These transactions are facilitated through TriumphPay APIs with parties on both sides of the transaction using structured data; similar to how a credit card works at a point-of-sale terminal. The integrations largely automate the process and make it cheaper, faster and safer. During the nine months ended September 30, 2024, we processed 1,984,605 network invoices representing a network payment volume of $3.231 billion. During the nine months ended September 30, 2023, we processed 644,557 network invoices representing a network payment volume of $1,099.9 million.
Net interest income increased due to increased average balances at our Payments segment and increased intersegment interest allocation period over period. The majority of the increased average balance was driven by supply chain finance receivables previously discussed. The increase in net interest income was also impacted by higher yields at our Payments segment.
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Noninterest income increased due to a $4.9 million increase in payment processing and audit fees, including intersegment fees, earned by TriumphPay during the nine months ended September 30, 2024 compared to the same period a year ago. There were no other significant changes in the components of noninterest income at our Payments segment period over period.
Noninterest expense increased primarily due to a $1.3 million increase in software amortization and a $1.3 million increase in communication and technology expense during the nine months ended September 30, 2024 compared to the same period a year ago. There were no other significant changes in the components of noninterest expense at our Payments segment period over period.
The acquisition of HubTran during 2021 allows TriumphPay to create a fully integrated payments network for trucking; servicing brokers and factors. TriumphPay already offered tools and services to increase automation, mitigate fraud, create back-office efficiency and improve the payment experience. Through the acquisition of HubTran, TriumphPay created additional value through the enhancement of its presentment, audit, and payment capabilities for third party logistics companies (i.e., freight brokers) and their carriers, and factors. The acquisition of HubTran was a meaningful inflection point in the operations of TriumphPay as the TriumphPay strategy has shifted from a capital-intensive on-balance sheet product with a focus on interest income to an open-loop payments network for the trucking industry with a focus on fee revenue. It is for this reason that management believes that earnings before interest, taxes, depreciation, and amortization and the adjustment to that metric enhance investors' overall understanding of the financial performance of the Payments segment. Further, as a result of the HubTran acquisition, management recorded $27.3 million of intangible assets that has led to meaningful amounts of amortization since acquisition.
Corporate and Other
(Dollars in thousands)Nine Months Ended September 30,% Change
Corporate and Other20242023$ Change
Total interest income$218 $131 $87 66.4 %
Intersegment interest allocations— — — — 
Total interest expense7,195 7,228 (33)(0.5 %)
Net interest income (expense)(6,977)(7,097)120 1.7 %
Credit loss expense (benefit)193 444 (251)(56.5 %)
Net interest income (expense) after credit loss expense(7,170)(7,541)371 4.9 %
Noninterest income3,229 198 3,031 1,530.8 %
Noninterest expense77,847 62,989 14,858 23.6 %
Net income (loss) before income tax expense$(81,788)$(70,332)$(11,456)(16.3 %)
Corporate and other is not a reportable segment, but rather includes certain revenue and expense from the Company's holding company as well as activities not allocated to specific business segments. Corporate and other reported an operating loss of $81.8 million for the nine months ended September 30, 2024 compared to an operating loss of $70.3 million for the nine months ended September 30, 2023. The increased operating loss was driven by increased noninterest expense which was the result of an $8.9 million increase in salaries and benefits expense. Additionally, Corporate experienced a $2.6 million increase in occupancy expense and a $1.2 million increase in intangible amortization primarily driven by the building acquired during March of 2024. Also, Corporate experienced a $1.6 million increase in communications and technology expense period over period. Further, Corporate experienced a $0.6 million increase in travel and entertainment expense driven by increased travel of our executive leadership team period over period. The increased operating loss was partially offset by increased noninterest income which was the result of $3.0 million of rental income from the acquired building recognized during the nine months ended September 30, 2024.
Financial Condition
Assets
Total assets were $5.866 billion at September 30, 2024, compared to $5.347 billion at December 31, 2023, an increase of $518.7 million, the components of which are discussed below.
Loan Portfolio
Loans held for investment were $4.333 billion at September 30, 2024, compared with $4.163 billion at December 31, 2023.
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The following table shows our total loan portfolio by portfolio segments:
September 30, 2024December 31, 2023$ Change% Change
(Dollars in thousands)% of Total% of Total
Commercial real estate$762,343 18 %$812,704 20 %$(50,361)(6.2 %)
Construction, land development, land217,148 5 %136,720 3 %80,428 58.8 %
1-4 family residential126,103 3 %125,916 3 %187 0.1 %
Farmland57,621 1 %63,568 2 %(5,947)(9.4 %)
Commercial1,093,477 25 %1,170,365 28 %(76,888)(6.6 %)
Factored receivables1,201,495 28 %1,116,654 26 %84,841 7.6 %
Consumer6,990 — %8,326 — %(1,336)(16.0 %)
Mortgage warehouse867,790 20 %728,847 18 %138,943 19.1 %
Total Loans$4,332,967 100 %$4,163,100 100 %$169,867 4.1 %
Commercial Real Estate Loans. Our commercial real estate loans decreased $50.4 million, or 6.2%, due to paydowns that outpaced new origination activity. A significant portion of our loan portfolio at September 30, 2024 consisted of commercial real estate loans secured by properties. Such loans can involve high principal loan amounts, and the repayment of these loans is dependent, in large part, on a borrower's ongoing business operations or on income generated from the properties. The table below sets forth the Company's commercial real estate loan portfolio, by portfolio industry sector and collateral location as of September 30, 2024.
(Dollars in thousands)IllinoisNew YorkTexasColoradoNew JerseyIowaOtherTotal
Non-owner occupied
Office$4,043 $25,582 $18,584 $1,448 $83,313 $372 $14,621 $147,963 
Multifamily45,556 — 32,271 10,164 — 7,818 34,659 130,468 
Retail3,984 52,676 6,726 6,399 — 2,091 33,566 105,442 
Industrial15,582 37,419 6,127 1,136 — 784 12,620 73,668 
Hospitality— — 1,649 5,581 — 9,253 26,636 43,119 
Other18,305 1,814 21,098 9,984 — 587 7,664 59,452 
87,470 117,491 86,455 34,712 83,313 20,905 129,766 560,112 
Owner occupied
Industrial22,371 — 2,340 6,240 — 22,500 17,984 71,435 
Hospitality3,096 — — 3,963 — 105 4,825 11,989 
Restaurant15,835 747 — 4,379 — 1,382 6,807 29,150 
Retail1,227 — — 10,740 — 166 1,568 13,701 
Office4,887 120 — 7,640 — 239 1,478 14,364 
Other4,211 — — 9,849 — 33,247 14,285 61,592 
51,627 867 2,340 42,811 — 57,639 46,947 202,231 
Total commercial real estate$139,097 $118,358 $88,795 $77,523 $83,313 $78,544 $176,713 $762,343 
Construction and Development Loans. Our construction and development loans increased $80.4 million, or 58.8%, due to origination and draw activity that outpaced paydowns and conversions to term loans.
Residential Real Estate Loans. Our one-to-four family residential loans increased $0.2 million, or 0.1%, due to new origination activity that outpaced paydowns.
Farmland Loans. Our farmland loans decreased $5.9 million, or 9.4%, due to paydowns that outpaced modest origination activity.
Commercial Loans. Our commercial loans held for investment decreased $76.9 million, or 6.6%, due to decreased asset-based lending balances, liquid credit balances, and other commercial lending balances. The decrease was partially offset by increased equipment lending balances as well as an increase in Agriculture loans. Our other commercial lending products, comprised primarily of general commercial loans originated in our community banking markets, decreased $16.2 million, or 5.3%.
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The following table shows our commercial loans:
(Dollars in thousands)September 30, 2024December 31, 2023$ Change% Change
Commercial
Equipment$488,326 $460,008 $28,318 6.2 %
Asset-based lending205,476 246,065 (40,589)(16.5 %)
Liquid credit59,539 113,901 (54,362)(47.7 %)
Agriculture52,997 47,059 5,938 12.6 %
Other commercial lending287,139 303,332 (16,193)(5.3 %)
Total commercial loans$1,093,477 $1,170,365 $(76,888)(6.6 %)
Factored Receivables. Our factored receivables increased $84.8 million, or 7.6%. At September 30, 2024, the balance of the Over-Formula Advance Portfolio included in factored receivables was $1.9 million. At September 30, 2024, the balance of factoring Misdirected Payments, net of customer reserves, was $19.4 million. See discussion of our factoring subsidiary in the Operating Segment Results for analysis of the key drivers impacting the change in the ending factored receivables balance during the period.
Consumer Loans. Our consumer loans decreased $1.3 million, or 16.0%, due to paydowns that outpaced modest origination activity.
Mortgage Warehouse. Our mortgage warehouse facilities increased $138.9 million, or 19.1%, due to seasonal changes in utilization. Client utilization of mortgage warehouse facilities may experience significant fluctuation on a day-to-day basis given mortgage origination market conditions. Our average mortgage warehouse lending balance was $693.0 million for the nine months ended September 30, 2024 compared to $782.4 million for the nine months ended September 30, 2023. Our average mortgage warehouse lending balance was $762.7 million for the three months ended September 30, 2024 compared to $757.6 million for the three months ended September 30, 2023.
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The following tables set forth the contractual maturities, including scheduled principal repayments, of our loan portfolio and the distribution between fixed and floating interest rate loans:
September 30, 2024
(Dollars in thousands)One Year or
Less		After One
but within
Five Years		After Five but within Fifteen
Years		After Fifteen
Years		Total
Commercial real estate$437,000 $289,173 $36,114 $56 $762,343 
Construction, land development, land71,886 141,634 3,628 — 217,148 
1-4 family residential5,859 30,977 7,894 81,373 126,103 
Farmland5,507 32,847 18,044 1,223 57,621 
Commercial367,586 712,675 13,216 — 1,093,477 
Factored receivables1,201,495 — — — 1,201,495 
Consumer933 4,980 1,069 8 6,990 
Mortgage warehouse867,790 — — — 867,790 
$2,958,056 $1,212,286 $79,965 $82,660 $4,332,967 
Sensitivity of loans to changes in interest rates:After One
but within
Five Years		After Five but within Fifteen
Years		After Fifteen
Years
Predetermined (fixed) interest rates
Commercial real estate$210,149 $1,409 $— 
Construction, land development, land97,698 274 — 
1-4 family residential24,824 2,012 5,891 
Farmland27,325 748 — 
Commercial553,249 6,440 — 
Factored receivables— — — 
Consumer4,980 1,069 8 
Mortgage warehouse— — — 
$918,225 $11,952 $5,899 
Floating interest rates
Commercial real estate$79,024 $34,705 $56 
Construction, land development, land43,936 3,354 — 
1-4 family residential6,153 5,882 75,482 
Farmland5,522 17,296 1,223 
Commercial159,426 6,776 — 
Factored receivables— — — 
Consumer— — — 
Mortgage warehouse— — — 
$294,061 $68,013 $76,761 
Total$1,212,286 $79,965 $82,660 
As of September 30, 2024, most of the Company’s non-factoring business activity is with customers located within certain states. The states of Texas (17%), Illinois (12%), Colorado (11%), and Iowa (5%) make up 45% of the Company’s gross loans, excluding factored receivables. Therefore, the Company’s exposure to credit risk is affected by changes in the economies in these states. At December 31, 2023, the states of Texas (17%), Colorado (15%), Illinois (12%), and Iowa (6%) made up 50% of the Company’s gross loans, excluding factored receivables.
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Further, a majority (97%) of our factored receivables, representing approximately 27% of our total loan portfolio as of September 30, 2024, are receivables purchased from trucking fleets, owner-operators, and freight brokers in the transportation industry. Although such concentration may cause our future interest income with respect to our factoring operations to be correlated with demand for the transportation industry in the United States generally, we feel that the credit risk with respect to our outstanding portfolio is appropriately mitigated as we limit the amount of receivables acquired from individual debtors and creditors thereby achieving diversification across a number of companies and industries. At December 31, 2023, 97% of our factored receivables, representing approximately 26% of our total loan portfolio, were receivables purchased from trucking fleets, owner-operators, and freight brokers in the transportation industry.
Nonperforming Assets
We have established procedures to assist us in maintaining the overall quality of our loan portfolio. In addition, we have adopted underwriting guidelines to be followed by our lending officers and require senior management review of proposed extensions of credit exceeding certain thresholds. When delinquencies exist, we monitor them for any negative or adverse trends. Our loan review procedures include approval of lending policies and underwriting guidelines by the board of directors of our bank subsidiary, independent loan review, approval of large credit relationships by our bank subsidiary’s Management Loan Committee and loan quality documentation procedures. We, like other financial institutions, are subject to the risk that our loan portfolio will be subject to increasing pressures from deteriorating borrower credit due to general economic conditions.
To manage the credit risks associated with its loan portfolio, management may, depending on current or anticipated economic conditions and related exposures, apply enhanced risk management measures to loans through analysis of a specific borrower's financial condition, including cash flow, collateral values, and guarantees, among other credit factors. In response to the current market dynamics, including economic uncertainties and the rapid increase in market interest rates since 2022, the Company has enhanced its stress testing to mitigate interest rate reset risk with a specific emphasis on borrowers’ abilities to absorb the impact of higher interest loan rates.
The following table sets forth the allocation of our nonperforming assets among our different asset categories as of the dates indicated. We classify nonperforming assets as nonaccrual loans and securities, factored receivables greater than 90 days past due, OREO, and other repossessed assets. The balances of nonperforming loans reflect the recorded investment in these assets, including deductions for purchase discounts.
(Dollars in thousands)September 30, 2024December 31, 2023
Nonperforming loans:
Commercial real estate$11,413 $2,447 
Construction, land development, land— — 
1-4 family residential959 1,178 
Farmland2,106 968 
Commercial74,190 40,951 
Factored receivables24,885 23,181 
Consumer132 133 
Mortgage warehouse— — 
Total nonperforming loans113,685 68,858 
Held to maturity securities4,187 4,766 
Equity investments without readily determinable fair value2,462 1,170 
Other real estate owned, net578 37 
Other repossessed assets341 950 
Total nonperforming assets$121,253 $75,781 
Nonperforming assets to total assets2.07 %1.42 %
Nonperforming loans to total loans held for investment2.62 %1.65 %
Total past due loans to total loans held for investment2.62 %2.00 %
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Nonperforming loans increased $44.8 million, or 65.1%, due to the addition of three equipment finance loans of $31.9 million, $8.7 million, and $3.6 million all collateralized by various equipment. Additionally, we added a $7.7 million multifamily loan fully collateralized by a mixed use development and a $1.6 million farmland loan fully collateralized by farmland. Further, we added a $2.3 million commercial loan that was fully reserved at period end and a $2.2 million commercial loan partially collateralized by the personal residences of the borrower's founder. These increases were partially offset by a $2.6 million reduction in a nonaccrual liquid credit relationship, a $1.5 million nonperforming agriculture and farmland relationship pay-down, a $1.2 million nonperforming equipment loan pay-down, a $1.1 million nonperforming equipment loan paydown, a $1.4 million partial paydown and partial charge-off of a nonperforming commercial real estate loan, and a $0.4 million reduction in nonperforming factored receivables. The entire balance of Misdirected Payments is included in nonperforming loans (specifically, factored receivables) in accordance with our policy. The balance of such Misdirected Payments, net of customer reserves, was $19.4 million, at September 30, 2024.
As a result of the activity previously described and changes in our period end total loans held for investment, the ratio of nonperforming loans to total loans held for investment increased to 2.62% at September 30, 2024 from 1.65% December 31, 2023.
Our ratio of nonperforming assets to total assets increased to 2.07% at September 30, 2024 from 1.42% December 31, 2023. This is due to the aforementioned loan activity and changes in our period end total assets.
Past due loans to total loans held for investment increased to 2.62% at September 30, 2024 from 2.00% at December 31, 2023, as a result of an increase past due commercial loans partially offset by a decrease in past due factored receivables. Both the $1.9 million acquired factoring Over-Formula Advance balance and the entire balance of Misdirected Payments are considered greater than 90 days past due at September 30, 2024. The balance of such Misdirected Payments, net of customer reserves, was $19.4 million, at September 30, 2024.
Allowance for Credit Losses on Loans
The ACL is a valuation allowance estimated at each balance sheet date in accordance with US GAAP that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. When the Company deems all or a portion of a loan to be uncollectible the appropriate amount is written off and the ACL is reduced by the same amount. Subsequent recoveries, if any, are credited to the ACL when received. See Note 1 of the Company’s 2023 Form 10-K and notes to the consolidated financial statements included elsewhere in this report for discussion of our ACL methodology on loans. Allocations of the ACL may be made for specific loans, but the entire allowance is available for any loan that, in the Company’s judgment, should be charged-off.
Loan loss valuation allowances are recorded on specific at-risk balances, typically consisting of collateral dependent loans and factored invoices greater than 90 days past due with negative cash reserves.
The following table sets forth the ACL by category of loan:
September 30, 2024December 31, 2023
(Dollars in thousands)Allocated
Allowance		% of Loan
Portfolio		ACL to
Loans		Allocated
Allowance		% of Loan
Portfolio		ACL to
Loans
Commercial real estate$4,401 18 %0.58 %$6,030 20 %0.74 %
Construction, land development, land2,929 5 %1.35 %965 3 %0.71 %
1-4 family residential970 3 %0.77 %927 3 %0.74 %
Farmland394 1 %0.68 %442 2 %0.70 %
Commercial19,966 25 %1.83 %14,060 28 %1.20 %
Factored receivables11,570 28 %0.96 %11,896 26 %1.07 %
Consumer146 — %2.09 %171 — %2.05 %
Mortgage warehouse867 20 %0.10 %728 18 %0.10 %
Total Loans$41,243 100 %0.95 %$35,219 100 %0.85 %
The ACL increased $6.0 million, or 17.1%. This increase reflects net charge-offs of $8.1 million and credit loss expense of $14.2 million. Refer to the Results of Operations: Credit Loss Expense section for discussion of material charge-offs and credit loss expense. At quarter end, our entire remaining Over-Formula Advance position was down from $3.2 million at December 31, 2023 to $1.9 million at September 30, 2024 and the entire balance at September 30, 2024 was fully reserved. At September 30, 2024, the Misdirected Payments amount, net of customer reserves, was $19.4 million. Based on our legal analysis and discussions with our counsel advising us on this matter, we continue to believe it is probable that we will prevail in such action and that the USPS will have the capacity to make payment on such receivable. Consequently, we have not reserved for such balance as of September 30, 2024.
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A driver of the change in ACL is change in the loss drivers that the Company forecasted to calculate expected losses at September 30, 2024 as compared to December 31, 2023. Such change had a negative impact on the Company’s loss drivers and assumptions over the reasonable and supportable forecast period and resulted in an increase of $2.5 million of ACL period over period.
The Company uses the discounted cash flow (DCF) method to estimate ACL for the commercial real estate, construction, land development, land, 1-4 family residential, commercial (excluding liquid credit and PPP), and consumer loan pools. For all loan pools utilizing the DCF method, the Company utilizes and forecasts national unemployment as a loss driver. The Company also utilizes and forecasts either one-year percentage change in national retail sales (commercial real estate – non multifamily, commercial general, commercial agriculture, commercial asset-based lending, commercial equipment finance, consumer), one-year percentage change in the national home price index (1-4 family residential and construction, land development, land), or one-year percentage change in national gross domestic product (commercial real estate – multifamily) as a second loss driver depending on the nature of the underlying loan pool and how well that loss driver correlates to expected future losses. Consistent forecasts of the loss drivers are used across the loan segments. The Company also forecasts prepayments speeds for use in the DCF models with higher prepayment speeds resulting in lower required ACL levels and vice versa for shorter prepayment speeds. These assumed prepayment speeds are based upon our historical prepayment speeds by loan type adjusted for the expected impact of the future interest rate environment. The impact of these assumed prepayment speeds is lesser in magnitude than the aforementioned loss driver assumptions.
For all DCF models at September 30, 2024, the Company has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over eight quarters on a straight-line basis. The Company leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of economic forecasts are also considered by the Company when developing the forecast metrics. At September 30, 2024 as compared to December 31, 2023, the Company forecasted minimal change in national unemployment and one-year percentage change in national gross domestic product while forecasting improvement in one-year percentage change in the national home price index and some degradation in on-year percentage change in national retail sales. At September 30, 2024 for national unemployment, the Company projected a low percentage in the first quarter followed by a gradual rise in the following three quarters. For percentage change in national retail sales, the Company projected a small increase in the first projected quarter followed by a decline to negative levels over the last three projected quarters to a level below recent actual periods. For percentage change in national home price index, the Company projected an increase in the first projected quarter followed by a steep drop to negative levels for the remaining three quarters with such negative levels peaking in the fourth projected quarter. For percentage change in national gross domestic product, management projected low-to-near-zero growth for each projected quarter with the exception of positive growth in the first projected quarter. At September 30, 2024, the Company used its historical prepayment speeds with minimal adjustment.
The Company uses a loss-rate method to estimate expected credit losses for the farmland, liquid credit, factored receivables, and mortgage warehouse loan pools. For each of these loan segments, the Company applies an expected loss ratio based on internal and peer historical losses adjusted as appropriate for qualitative factors. Qualitative loss factors are based on the Company's judgment of company, market, industry or business specific data, changes in underlying loan composition of specific portfolios, trends relating to credit quality, delinquency, non-performing and adversely rated loans, and reasonable and supportable forecasts of economic conditions. Loss factors used to calculate the required ACL on pools that use the loss-rate method reflect the forecasted economic conditions described above.
The following tables show our credit ratios and an analysis of our credit loss expense:
(Dollars in thousands)September 30, 2024December 31, 2023
Allowance for credit losses on loans$41,243 $35,219 
Total loans held for investment$4,332,967 $4,163,100 
Allowance to total loans held for investment0.95 %0.85 %
Nonaccrual loans$90,950 $45,677 
Total loans held for investment$4,332,967 $4,163,100 
Nonaccrual loans to total loans held for investment2.10 %1.10 %
Allowance for credit losses on loans$41,243 $35,219 
Nonaccrual loans$90,950 $45,677 
Allowance for credit losses to nonaccrual loans45.35 %77.10 %
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Three Months Ended September 30,
20242023
(Dollars in thousands)Net
Charge-Offs		Average Loans HFINet Charge-Off RatioNet
Charge-Offs		Average Loans HFINet Charge-Off Ratio
Commercial real estate$831 $779,016 0.11 %$16 $793,566 — %
Construction, land development, land— 206,616 — %(2)119,173 — %
1-4 family residential17 127,189 0.01 %(1)130,501 — %
Farmland— 58,421 — %— 65,201 — %
Commercial1,895 1,065,608 0.18 %144 1,232,967 0.01 %
Factored receivables681 1,191,528 0.06 %1,206 1,173,192 0.10 %
Consumer98 8,274 1.18 %(157)8,913 (1.76)%
Mortgage warehouse— 762,722 — %— 757,632 — %
Total Loans$3,522 $4,199,374 0.08 %$1,206 $4,281,145 0.03 %
Quarter to date net loans charged off increased $2.3 million with no individually significant charge-offs during the three months ended September 30, 2024 or 2023.
Nine Months Ended September 30,
20242023
(Dollars in thousands)Net
Charge-Offs		Average Loans HFINet Charge-Off RatioNet
Charge-Offs		Average Loans HFINet Charge-Off Ratio
Commercial real estate$831 $805,127 0.10 %$(54)$732,137 (0.01)%
Construction, land development, land(1)191,433 — %(4)106,340 — %
1-4 family residential28 127,517 0.02 %(6)129,921 — %
Farmland— 58,611 — %— 67,106 — %
Commercial3,652 1,106,184 0.33 %5,400 1,217,966 0.44 %
Factored receivables3,371 1,154,906 0.29 %8,957 1,169,353 0.77 %
Consumer246 8,636 2.85 %(83)9,221 (0.90)%
Mortgage warehouse— 693,012 — %— 782,368 — %
Total Loans$8,127 $4,145,426 0.20 %$14,210 $4,214,412 0.34 %
Year to date net loans charged off decreased $6.1 million with no individually significant charge-offs during the nine months ended September 30, 2024. Prior period charge-offs include the aforementioned $3.3 million net charge-off of the fully reserved over-formula advance balance. Net charge-offs of factored receivables excluding the over-formula advance were $5.7 million. Additionally, during the nine months ended September 30, 2023, the Company charged off two liquid credit loans carrying balances of $3.2 million and a $1.6 million, respectively, at the time of charge-off.
Securities
As of September 30, 2024 and December 31, 2023, we held equity securities with readily determinable fair values of $4.6 million and $4.5 million, respectively. These securities represent investments in a publicly traded Community Reinvestment Act mutual fund and are subject to market pricing volatility, with changes in fair value reflected in earnings.
As of September 30, 2024, we held debt securities classified as available for sale with a fair value of $403.2 million, an increase of $103.5 million from $299.6 million at December 31, 2023. The following table illustrates the changes in our available for sale debt securities:
Available For Sale Debt Securities:
(Dollars in thousands)September 30, 2024December 31, 2023$ Change% Change
Mortgage-backed securities, residential$75,149 $55,839 $19,310 34.6 %
Asset-backed securities924 1,170 (246)(21.0)%
State and municipal3,443 4,515 (1,072)(23.7)%
CLO Securities322,088 236,291 85,797 36.3 %
Corporate bonds275 275 — — %
SBA pooled securities1,307 1,554 (247)(15.9)%
$403,186 $299,644 $103,542 34.6 %
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Our available for sale CLO portfolio consists of investment grade positions in high ranking tranches within their respective securitization structures. As of September 30, 2024, the Company determined that all impaired available for sale securities experienced a decline in fair value below their amortized cost basis due to noncredit-related factors. Therefore, the Company carried no ACL at September 30, 2024. Our available for sale securities can be used for pledging to secure FHLB borrowings and public deposits, or can be sold to meet liquidity needs.
As of September 30, 2024, we held investments classified as held to maturity with an amortized cost, net of ACL, of $2.1 million, a decrease of $0.9 million from $3.0 million at December 31, 2023. See previous discussion of Credit Loss Expense related to our held to maturity securities for further details regarding the nature of these securities and the required ACL at September 30, 2024.
The following tables set forth the amortized cost and average yield of our debt securities, by type and contractual maturity:
Maturity as of September 30, 2024
One Year or LessAfter One but within Five YearsAfter Five but within Ten YearsAfter Ten YearsTotal
(Dollars in thousands)Amortized
Cost		Average
Yield		Amortized
Cost		Average
Yield		Amortized
Cost		Average
Yield		Amortized
Cost		Average
Yield		Amortized
Cost		Average
Yield
Mortgage-backed securities$5 3.69 %$8,117 3.97 %$1,006 2.62 %$69,457 4.41 %$78,585 4.34 %
Asset-backed securities— — %— — %926 6.54 %— — %926 6.54 %
State and municipal572 3.88 %2,152 2.82 %763 2.52 %— — %3,487 2.93 %
CLO securities— — %— — %48,021 7.13 %272,927 6.86 %320,948 6.90 %
Corporate bonds— — %— — %267 5.07 %— — %267 5.07 %
SBA pooled securities— — %— — %380 3.22 %984 4.08 %1,364 3.84 %
Total available for sale securities$577 3.88 %$10,269 3.73 %$51,363 6.93 %$343,368 6.36 %$405,577 6.36 %
Held to maturity securities:$— — %$5,504 2.44 %$— — %$— — %$5,504 2.44 %
Liabilities
Total liabilities were $4.980 billion as of September 30, 2024, compared to $4.483 billion at December 31, 2023, an increase of $497.3 million, the components of which are discussed below.
Deposits
The following table summarizes our deposits:
(Dollars in thousands)September 30, 2024December 31, 2023$ Change% Change
Noninterest bearing demand$2,103,092 $1,632,022 $471,070 28.9 %
Interest bearing demand700,928 757,455 (56,527)(7.5 %)
Individual retirement accounts46,096 52,195 (6,099)(11.7 %)
Money market606,321 568,772 37,549 6.6 %
Savings533,553 555,047 (21,494)(3.9 %)
Certificates of deposit242,093 265,525 (23,432)(8.8 %)
Brokered time deposits474,611 146,458 328,153 224.1 %
Other brokered deposits— 4 (4)(100.0 %)
Total Deposits$4,706,694 $3,977,478 $729,216 18.3 %
Our total deposits increased $729.2 million, or 18.3%, primarily due to an increase in noninterest bearing demand deposits, brokered time deposits, and money market deposits. The Company experienced decreases in all other material deposit categories. Other brokered deposits are non-maturity deposits obtained from wholesale sources. As of September 30, 2024, interest bearing demand deposits, noninterest bearing deposits, money market deposits, other brokered deposits, and savings deposits accounted for 84% of our total deposits, while individual retirement accounts, certificates of deposit, and brokered time deposits made up 16% of total deposits. At September 30, 2024 and December 31, 2023, our estimated uninsured deposits were $1,501,376,000 and $1,840,621,000, respectively.
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At September 30, 2024 we held $61.8 million of time deposits that meet or exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limit. The following table provides information on the maturity distribution of time deposits exceeding the FDIC insurance limit as of September 30, 2024:
(Dollars in thousands)Over
$250,000
Maturity
3 months or less$21,959 
Over 3 through 6 months17,403 
Over 6 through 12 months15,797 
Over 12 months1,413 
$56,572 
The following table summarizes our average deposit balances and weighted average rates:
Three Months Ended September 30, 2024Three Months Ended September 30, 2023
(Dollars in thousands)Average
Balance		Weighted
Avg Rates		% of
Total		Average
Balance		Weighted
Avg Rates		% of
Total
Interest bearing demand$721,482 0.54 %16 %$776,812 0.39 %18 %
Individual retirement accounts47,397 1.33 %1 %56,265 0.94 %1 %
Money market580,281 2.83 %13 %542,243 1.98 %13 %
Savings538,367 1.19 %12 %537,980 0.53 %12 %
Certificates of deposit248,126 3.35 %5 %270,535 1.84 %6 %
Brokered time deposits404,537 4.99 %9 %501,221 5.32 %12 %
Other brokered deposits— — %— %12,231 5.48 %— %
Total interest bearing deposits2,540,190 2.20 %56 %2,697,287 1.83 %62 %
Noninterest bearing demand1,991,042 — 44 %1,615,697 — 38 %
Total deposits$4,531,232 1.23 %100 %$4,312,984 1.15 %100 %
Nine Months Ended September 30, 2024Nine Months Ended September 30, 2023
(Dollars in thousands)Average
Balance		Weighted
Avg Yields		% of
Total		Average
Balance		Weighted
Avg Yields		% of
Total
Interest bearing demand$733,930 0.55 %17 %$805,756 0.34 %19 %
Individual retirement accounts49,574 1.34 %1 %60,507 0.71 %1 %
Money market571,860 2.85 %13 %515,864 1.43 %12 %
Savings537,825 1.10 %12 %537,598 0.37 %13 %
Certificates of deposit256,297 3.07 %6 %285,207 1.27 %7 %
Brokered time deposits374,162 5.18 %8 %283,181 4.76 %7 %
Other brokered deposits29,577 5.43 %1 %8,609 5.36 %— %
Total interest bearing deposits2,553,225 2.18 %58 %2,496,722 1.21 %59 %
Noninterest bearing demand1,852,360 — 42 %1,639,413 — 41 %
Total deposits$4,405,585 1.26 %100 %$4,136,135 0.73 %100 %
The Company's deposit base is made up of a high number of customers with accounts spread across 63 locations in six states. Our deposit base is diverse in terms of both geography and industry, comprised largely of retail as well small-to-medium sized business customers. The majority of our deposits are FDIC insured, and the runoff of certain deposit types we saw throughout the prior year appears to have been a continuation of the trend we saw over several quarters prior to that: the normalizing of pandemic-era surge balances and the movement of rate-sensitive excess balances to other investments.
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Other Borrowings
Customer Repurchase Agreements
The following provides a summary of our customer repurchase agreements as of and for the nine months ended September 30, 2024 and the year ended December 31, 2023:
(Dollars in thousands)September 30, 2024December 31, 2023
Amount outstanding at end of period$— $— 
Weighted average interest rate at end of period— %— %
Average daily balance during the period$— $723 
Weighted average interest rate during the period— %0.03 %
Maximum month-end balance during the period$— $3,208 
Our customer repurchase agreements generally have overnight maturities. Variances in these balances are attributable to normal customer behavior and seasonal factors affecting their liquidity positions.
FHLB Advances
The following provides a summary of our FHLB advances as of and for the nine months ended September 30, 2024 and the year ended December 31, 2023:
(Dollars in thousands)September 30, 2024December 31, 2023
Amount outstanding at end of period$30,000 $255,000 
Weighted average interest rate at end of period5.47 %5.65 %
Average amount outstanding during the period132,828 194,795 
Weighted average interest rate during the period5.51 %5.30 %
Highest month end balance during the period280,000 530,000 
Our FHLB advances are collateralized by assets, including a blanket pledge of certain loans. At September 30, 2024 and December 31, 2023, we had $813.7 million and $587.0 million, respectively, in unused and available advances from the FHLB.
Subordinated Notes
The following provides a summary of our subordinated notes as of September 30, 2024:
(Dollars in thousands)Face ValueCarrying ValueMaturity DateCurrent Interest RateFirst Repricing DateVariable Interest Rate at Repricing DateInitial Issuance Costs
Subordinated Notes issued November 27, 2019$39,500 $39,435 20294.875%11/27/2024Three Month LIBOR plus 3.330%$1,218 
Subordinated Notes issued August 26, 202170,000 69,637 20313.500%9/01/2026Three Month SOFR plus 2.860%$1,776 
$109,500 $109,072 
The Subordinated Notes bear interest payable semi-annually in arrears to, but excluding the first repricing date, and thereafter payable quarterly in arrears at an annual floating rate. We may, at our option, beginning on the respective first repricing date and on any scheduled interest payment date thereafter, redeem the Subordinated Notes, in whole or in part, at a redemption price equal to the outstanding principal amount of the Subordinated Notes to be redeemed plus accrued and unpaid interest to, but excluding, the date of redemption.
The Subordinated Notes are included on the consolidated balance sheets as liabilities at their carrying values; however, for regulatory purposes, the carrying value of these obligations were eligible for inclusion in Tier 2 regulatory capital. Issuance costs related to the Subordinated Notes have been netted against the subordinated notes liability on the balance sheet. The debt issuance costs are being amortized using the effective interest method through maturity and recognized as a component of interest expense.
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The Subordinated Notes are subordinated in right of payment to the Company’s existing and future senior indebtedness and are structurally subordinated to the Company’s subsidiaries’ existing and future indebtedness and other obligations.
Junior Subordinated Debentures
The following provides a summary of our junior subordinated debentures as of September 30, 2024:
(Dollars in thousands)Face ValueCarrying ValueMaturity DateInterest Rate
National Bancshares Capital Trust II$15,464 $13,746 September 2033
Three Month SOFR + 3.26%
National Bancshares Capital Trust III17,526 13,820 July 2036
Three Month SOFR + 1.64%
ColoEast Capital Trust I5,155 3,900 September 2035
Three Month SOFR + 1.86%
ColoEast Capital Trust II6,700 5,028 March 2037
Three Month SOFR + 2.05%
Valley Bancorp Statutory Trust I3,093 2,933 September 2032
Three Month SOFR + 3.66%
Valley Bancorp Statutory Trust II3,093 2,769 July 2034
Three Month SOFR + 3.01%
$51,031 $42,196 
These debentures are unsecured obligations and were issued to trusts that are unconsolidated subsidiaries. The trusts in turn issued trust preferred securities with identical payment terms to unrelated investors. The debentures may be called by the Company at par plus any accrued but unpaid interest; however, we have no current plans to redeem them prior to maturity. Interest on the debentures is calculated quarterly, based on a contractual rate equal to three month SOFR plus a weighted average spread of 2.41%. As part of the purchase accounting adjustments made with the National Bancshares, Inc. acquisition on October 15, 2013, the ColoEast acquisition on August 1, 2016, and the Valley acquisition on December 9, 2017, we adjusted the carrying value of the junior subordinated debentures to fair value as of the respective acquisition dates. The discounts on the debentures will continue to be amortized through maturity and recognized as a component of interest expense.
The debentures are included on our consolidated balance sheet as liabilities; however, for regulatory purposes, these obligations are eligible for inclusion in regulatory capital, subject to certain limitations. All of the carrying value of $42.2 million was allowed in the calculation of Tier I capital as of September 30, 2024.
Capital Resources and Liquidity Management
Capital Resources
Our stockholders’ equity totaled $885.8 million as of September 30, 2024, compared to $864.4 million as of December 31, 2023, an increase of $21.4 million. Stockholders’ equity increased during this period primarily due to our net income of $12.3 million.
Liquidity Management
We define liquidity as our ability to generate sufficient cash to fund current loan demand, deposit withdrawals, other cash demands and disbursement needs, and otherwise to operate on an ongoing basis.
We manage liquidity at the holding company level as well as that of our bank subsidiary. The management of liquidity at both levels is critical, because the holding company and our bank subsidiary have different funding needs and sources, and each is subject to regulatory guidelines and requirements which require minimum levels of liquidity. We believe that our liquidity ratios meet or exceed those guidelines and that our present position is adequate to meet our current and future liquidity needs.
As part of our liquidity management process, we regularly stress test our balance sheet to ensure that we are continually able to withstand unexpected liquidity shocks such as sudden or protracted material deposit runoff. This analysis explicitly contemplates the immediate runoff of any meaningful deposit concentrations such as the servicing deposits that we hold on behalf of our mortgage warehouse customers.
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Our liquidity requirements are met primarily through cash flow from operations, receipt of pre-paid and maturing balances in our loan and investment portfolios, debt financing and increases in customer deposits. Our liquidity position is supported by management of liquid assets and liabilities and access to other sources of funds. Liquid assets include cash, interest earning deposits in banks, federal funds sold, securities available for sale and maturing or prepaying balances in our investment and loan portfolios. Liquid liabilities include core deposits, federal funds purchased, securities sold under repurchase agreements and other borrowings. Other sources of funds include the sale of loans, brokered deposits, the issuance of additional collateralized borrowings such as FHLB advances or borrowings from the Federal Reserve, the issuance of debt securities and the issuance of common securities. For additional information regarding our operating, investing and financing cash flows, see the Consolidated Statements of Cash Flows provided in our consolidated financial statements.
In addition to the liquidity provided by the sources described above, our subsidiary bank maintains correspondent relationships with other banks in order to sell loans or purchase overnight funds should additional liquidity be needed. As of September 30, 2024, TBK Bank had $549.5 million of unused borrowing capacity from the Federal Reserve Bank discount window and unsecured federal funds lines of credit with seven unaffiliated banks totaling $227.5 million, with no amounts advanced against those lines. Additionally, as of September 30, 2024, we had $813.7 million in unused and available advances from the FHLB. We have historically utilized FHLB advances to support the fluctuating and sometimes unpredictable balances in our mortgage warehouse lending portfolio, and we continue to have the ability to do so. Further, as of September 30, 2024, we had $157.7 million in unused and available capacity to deliver factored receivables to another bank should additional liquidity be needed.
Contractual Obligations
The following table summarizes our contractual obligations and other commitments to make future payments as of September 30, 2024. The amount of the obligations presented in the table reflect principal amounts only and exclude the amount of interest we are obligated to pay. Also excluded from the table are a number of obligations to be settled in cash. These excluded items are reflected in our consolidated balance sheet and include deposits with no stated maturity, trade payables, and accrued interest payable.
Payments Due by Period - September 30, 2024
(Dollars in thousands)TotalOne Year or
Less		After One
but within
Three Years		After Three
but within
Five Years		After Five
Years
Federal Home Loan Bank advances$30,000 $— $30,000 $— $— 
Subordinated notes109,500 — — — 109,500 
Junior subordinated debentures51,031 — — — 51,031 
Operating lease agreements32,988 5,851 10,837 8,811 7,489 
Time deposits with stated maturity dates762,800 735,316 23,994 3,490 — 
Total contractual obligations$986,319 $741,167 $64,831 $12,301 $168,020 
Regulatory Capital Requirements
Our capital management consists of providing equity to support our current and future operations. We are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s or TBK Bank’s financial statements. For further information regarding our regulatory capital requirements, see Note 9 – Regulatory Matters in the accompanying condensed notes to the consolidated financial statements included elsewhere in this report.
Off-Balance Sheet Arrangements
In the normal course of business, we enter into various transactions, which, in accordance with GAAP, are not included in our consolidated balance sheets. We enter into these transactions to meet the financing needs of our customers. These transactions include commitments to extend credit and standby and commercial letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. For further information, see Note 7 – Off-Balance Sheet Loan Commitments in the accompanying condensed notes to the consolidated financial statements included elsewhere in this report.
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Critical Accounting Policies and Estimates
Our accounting policies are fundamental to understanding our management’s discussion and analysis of our results of operations and financial condition. We have identified certain significant accounting policies which involve a higher degree of judgment and complexity in making certain estimates and assumptions that affect amounts reported in our consolidated financial statements. The significant accounting policy which we believe to be the most critical in preparing our consolidated financial statements is the determination of the allowance for credit losses. Since December 31, 2023, there have been no changes in critical accounting policies as further described under “Critical Accounting Policies and Estimates” and in Note 1 to the Consolidated Financial Statements in our 2023 Form 10-K.
Recently Issued Accounting Pronouncements
See Note 1 – Summary of Significant Accounting Policies in the accompanying condensed notes to consolidated financial statements included elsewhere in this report for details of recently issued accounting pronouncements and their expected impact on our consolidated financial statements.
Forward-Looking Statements
This document contains forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable of a future or forward-looking nature. These forward-looking statements are not historical facts and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control, particularly with regard to developments related to COVID-19. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but are not limited to, the following:
•business and economic conditions generally and in the bank and non-bank financial services industries, nationally and within our local market areas;
•our ability to mitigate our risk exposures;
•our ability to maintain our historical earnings trends;
•changes in management personnel;
•interest rate risk;
•concentration of our products and services in the transportation industry;
•credit risk associated with our loan portfolio;
•lack of seasoning in our loan portfolio;
•deteriorating asset quality and higher loan charge-offs;
•time and effort necessary to resolve nonperforming assets;
•inaccuracy of the assumptions and estimates we make in establishing reserves for probable loan losses and other estimates;
•risks related to the integration of acquired businesses and any future acquisitions;
•our ability to successfully identify and address the risks associated with our possible future acquisitions, and the risks that our prior and possible future acquisitions make it more difficult for investors to evaluate our business, financial condition and results of operations, and impairs our ability to accurately forecast our future performance;
•lack of liquidity;
•fluctuations in the fair value and liquidity of the securities we hold for sale;
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•impairment of investment securities, goodwill, other intangible assets or deferred tax assets;
•our risk management strategies;
•environmental liability associated with our lending activities;
•increased competition in the bank and non-bank financial services industries, nationally, regionally or locally, which may adversely affect pricing and terms;
•the accuracy of our financial statements and related disclosures;
•material weaknesses in our internal control over financial reporting;
•system failures or failures to prevent breaches of our network security;
•the institution and outcome of litigation and other legal proceedings against us or to which we become subject;
•changes in carry-forwards of net operating losses;
•changes in federal tax law or policy;
•the impact of recent and future legislative and regulatory changes, including changes in banking, securities and tax laws and regulations, such as the Dodd-Frank Act and their application by our regulators;
•governmental monetary and fiscal policies;
•changes in the scope and cost of FDIC, insurance and other coverages;
•failure to receive regulatory approval for future acquisitions and;
•increases in our capital requirements.
The foregoing factors should not be construed as exhaustive. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Asset/Liability Management and Interest Rate Risk
The principal objective of our asset and liability management function is to evaluate the interest rate risk within the balance sheet and pursue a controlled assumption of interest rate risk while maximizing net income and preserving adequate levels of liquidity and capital. The board of directors of our subsidiary bank has oversight of our asset and liability management function, which is managed by our Chief Financial Officer. Our Chief Financial Officer meets with our senior executive management team regularly to review, among other things, the sensitivity of our assets and liabilities to market interest rate changes, local and national market conditions and market interest rates. That group also reviews our liquidity, capital, deposit mix, loan mix and investment positions.
As a financial institution, our primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the fair value of all interest-earning assets and interest-bearing liabilities, other than those which have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair values.
We manage our exposure to interest rates primarily by structuring our balance sheet in the ordinary course of business. We do not typically enter into derivative contracts for the purpose of managing interest rate risk, but we may elect to do so in the future. Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets.
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We use an interest rate risk simulation model to test the interest rate sensitivity of net interest income and the balance sheet. Instantaneous parallel rate shift scenarios are modeled and utilized to evaluate risk and establish exposure limits for acceptable changes in projected net interest margin. These scenarios, known as rate shocks, simulate an instantaneous change in interest rates and use various assumptions, including, but not limited to, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, and reinvestment and replacement of asset and liability cash flows. We also analyze the economic value of equity as a secondary measure of interest rate risk. This is a complementary measure to net interest income where the calculated value is the result of the fair value of assets less the fair value of liabilities. The economic value of equity is a longer term view of interest rate risk because it measures the present value of all future cash flows. The impact of changes in interest rates on this calculation is analyzed for the risk to our future earnings and is used in conjunction with the analyses on net interest income.
The following table summarizes simulated change in net interest income versus unchanged rates as of September 30, 2024 and December 31, 2023:
September 30, 2024December 31, 2023
Following 12 MonthsMonths
13-24		Following 12 MonthsMonths
13-24
+400 basis points11.6 %14.4 %17.0 %19.2 %
+300 basis points8.7 %10.8 %12.8 %14.3 %
+200 basis points5.8 %7.2 %8.5 %9.5 %
+100 basis points2.9 %3.6 %4.3 %4.8 %
Flat rates0.0 %0.0 %0.0 %0.0 %
-100 basis points(3.3 %)(4.1 %)(4.7 %)(5.7 %)
-200 basis points(6.5 %)(8.5 %)(9.4 %)(11.4 %)
-300 basis points(9.9 %)(13.1 %)(14.3 %)(17.7 %)
-400 basis points(12.8 %)(16.8 %)(18.0 %)(22.7 %)
The following table presents the change in our economic value of equity as of September 30, 2024 and December 31, 2023, assuming immediate parallel shifts in interest rates:
Economic Value of Equity at Risk (%)
September 30, 2024December 31, 2023
+400 basis points10.5 %18.3 %
+300 basis points8.3 %14.6 %
+200 basis points5.9 %10.5 %
+100 basis points3.2 %5.9 %
Flat rates0.0 %0.0 %
-100 basis points(6.8 %)(6.7 %)
-200 basis points(13.9 %)(13.9 %)
-300 basis points(21.5 %)(21.5 %)
-400 basis points(27.3 %)(28.8 %)
Many assumptions are used to calculate the impact of interest rate fluctuations. Actual results may be significantly different than our projections due to several factors, including the timing and frequency of rate changes, market conditions and the shape of the yield curve. The computations of interest rate risk shown above do not include actions that our management may undertake to manage the risks in response to anticipated changes in interest rates, and actual results may also differ due to any actions taken in response to the changing rates.
As part of our asset/liability management strategy, our management has emphasized the origination of shorter duration loans as well as variable rate loans to limit the negative exposure to a rate increase. We also desire to acquire deposit transaction accounts, particularly noninterest or low interest-bearing non-maturity deposit accounts, whose cost is less sensitive to changes in interest rates. We intend to focus our strategy on utilizing our deposit base and operating platform to increase these deposit transaction accounts.
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ITEM 4
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply judgment in evaluating its controls and procedures. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time we are a party to various litigation matters incidental to the conduct of our business. Except as set forth below, we are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, prospects, financial condition, liquidity, results of operation, cash flows or capital levels.
We are party to a lawsuit in the United States Court of Federal Claims seeking a ruling that the United States Postal Service (“USPS”) is obligated to make payment to us with respect to invoices totaling approximately $19.4 million, net of customer reserves, that it separately paid to our customer, a vendor to the USPS who hauled mail pursuant to contracts it has with such entity, in violation of notices provided to the USPS that such payments were to be made directly to us (the “Misdirected Payments”). Although we believe we have valid claims that the USPS is obligated to make payment to us on such receivable and that the USPS will have the capacity to make such payment, the issues in this litigation are novel issues of law that have little to no precedent and there can be no assurances that a court will agree with our interpretation of the law on these matters. If a court were to rule against us in this litigation, our only recourse would be against our customer, who failed to remit the Misdirected Payments to us as required when received, and who may not have capacity to make such payment to us. Consequently, we could incur losses up to the full amount of the Misdirected Payments in such event, which could be material to our business, financial condition and results of operations.
Item 1A. Risk Factors
There have been no material changes in the Company’s risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Other Information
Insider Trading Arrangements and Policies
On May 6, 2024, Mr. Edward J. Schreyer, the Company’s Executive Vice President and Chief Operating Officer, adopted a written plan for the sale of our common stock that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act (the “Schreyer Trading Plan”). The Schreyer Trading Plan covers the sale of up to 12,257 shares of the Company’s common stock in several transactions over a period commencing after the later of (1) 90 days from the execution of the Schreyer Trading Plan and (2) the second trading day following the public disclosure of the Company’s financial results on Form 10-Q for the quarter ended June 30, 2024, and will cease upon the earlier of January 31, 2025 or the sale of all shares subject to the Schreyer Trading Plan.
On August 29, 2024, Mr. Aaron Graft, the Company’s President and Chief Executive Officer, adopted a written plan for the sale of our common stock that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act (the “Graft Trading Plan”). The Graft Trading Plan covers the sale of up to 54,000 shares of the Company’s common stock in several transactions over a period commencing after the later of (1) 91 days from the execution of the Graft Trading Plan and (2) the third trading day following the public disclosure of the Company’s financial results on Form 10-Q for the quarter ended September 30, 2024, and will cease upon the earlier of November 28, 2025 or the sale of all shares subject to the Graft Trading Plan.
As of the end of the third quarter of 2024, none of our other directors or executive officers adopted Rule 10b5-1 trading plans and none of our directors or executive officers terminated a Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).
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Item 6. Exhibits
Exhibits (Exhibits marked with a “†” denote management contracts or compensatory plans or arrangements)
3.1
3.2
3.3
3.4
3.5
3.6
31.1
31.2
32.1
101.INSInline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
* Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the Securities and Exchange Commission upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TRIUMPH FINANCIAL INC.
(Registrant)
Date:October 16, 2024/s/ Aaron P. Graft
Aaron P. Graft
President and Chief Executive Officer
Date:October 16, 2024/s/ W. Bradley Voss
W. Bradley Voss
Chief Financial Officer
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